HMSC
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105
.E55
no.695
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to Future of Northwest Maritime Industries X
Proceedings of the Conference
Red Lion – Lloyd Center, Portland, Oregon
20 September, 1983
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Oregon State University Extension Service
Sea Grant Marine Advisory Program
Special Report 695/December 1983
• ER
g736b.
Victor Atiyeh
Dick Copeland
Erik Falkenberg
.011111111110,11011811111111
THE FUTURE OF THE NORTHWEST MARITIME INDUSTRIES X
A Conference Sponsored by
Oregon. State University Extension Service
Sea Grant Marine Advisory Program
Washington State University Extension Service
University of Washington Sea Grant Program
Propeller Club
Women's Shipping Club
Portland Shipping Club
Portland Steamship Operators
Portland, Oregon
20 September 1983
Oregon State University Extension Service
Sea Grant Marine Advisory Program
Corvallis, Oregon 97331
Conference Steering Committee
Gib Carter
OSU Extension
Service
Portl and
Kent Roberts
Parks , Montague , Allen & Greif
Po rtl and
Di ck Copeland
Merchants
Exchange
Portl and
Mike Spranger
WSU Extension Service
Vancouver, Washington
Jerry McMurry
NW Marine
Iron Works
Portland
Jim Stafford
Portl and Shipping Club
Port] and
Hi 1 arie Miller
Crowley Maritime
Po rtl and
Rand Wintermute
Portl and Steamship Operators
Po rtl and
Linda Pearson
Port of Portl and
Portl and
MARILYN POTTS GUINLIBRARY HATFIELD MARINE SCIENCE CENTER
-
OREGON STATE UNIVERSITY
WiEWPORT. OREGON 97365
Economic Forecast
COLUMBIA RIVER TRANSPORTATION SYSTEM
Honorable Victor Atiyeh
Governor of Oregon
Panel
SHIPBUILDING, REPAIR & MAINTENANCE
Moderator: James A. Beall
Garvey, Schubert, Adams & Barer
Panel:
Foreign Competition & Pending
Portland Situation
--George Tuckey
Legislation
NW Marine Iron Works
-Dave Neset
Port of Portland
Other West Coast Ports
Shipyard Labor in the Northwest
-Scott Fitzwater
Dillingham Ship Repair
-William Slack
Electrical Worker's Union Local 48
Dept. of Defense Position
-James A. Beall
Garvey, Schubert, Adams & Barer
Update
COLUMBIA RIVER AND NORTHWEST
Maritime Administration Office
in Portland
-Capt. John W. Pullen
Maritime Development Rep.
Proposed Liner Consortium
-Roland Cornelius
Int'l Shipping Co., Inc.
Columbia River Customs District
-Steven Newman
Col. River Customs, Brokers,
and Forwarders Assoc.
Port of Portland - 20 Year Master
Plan
--Margery P. Abbott
Sr. Planner, Port of Portland
Vessel In-Port Locator System
-Dick Copeland, V.P., Pacific Reg.
National Assoc. of Marine Exchanges
Panel Debate
OCEAN CARRIERS - CONFERENCE VS. NON-CONFERENCE
Moderator:
Dr. Mike Martin
Oregon State University
Panel:
Pro-Conference
-Michael Uremovich
American President Lines
Non-Conference
--Erik Falkenberg
Westwood Shipping
Shipper's Perspective
--David Buffam
Ted L. Rausch & Company
ECONOMIC DEVELOPMENT AND THE COLUMBIA RIVER
TRANSPORTATION SYSTEM
VictQL
Governor of Oregon
The Maritime Advisory Committee, which I formed early on
in my administration has been very helpful to me as we deal
with a variety of issues that relate to the maritime industry.
You might be interested in knowing that I have talked to
Governors Deukmajion and Spellman and encouraged them both to
do the same and they indicated a great deal of interest. So if
you have an opportunity to talk to either one of them, you
might encourage them to move along that line because it has
been useful.
The role the Columbia/Snake River System plays and the
role that each of you play has an impact on every Oregonian,
although they really seldom realize it. Only 10 years ago,
most of the cargo on this river system originated within 75
miles of its banks. Today that sounds impossible. Now the
Columbia River Snake River System has extended its
influence
more than 1000 miles to include 11 states and perhaps a quarter
of the nation. Visitors to Oregon like to drive east from
Portland to enjoy the natural beauty of the Columbia Gorge.
They must return surprised at seeing a waterway that is
reminiscent of the Mississippi or the St. Lawrence Seaway. As
the second largest river system in the United States, the
Columbia/Snake system is a most significant link in the modern
day transportation system that has become the substitute for
the Northwest Passage sought by our early explorers. The Port
of Portland alone serves 500 businesses in this region. Just
the importation of automobiles at the Port of Portland is
believed to contribute directly or indirectly to 9000 Jobs.
Although it has been said that water and politics do not mix, I
know you have problems that do involve politics. I
recognize
the critical
importance of this waterway to the Northwest
Region and
I
have
worked
aggressively to explain that
importance to our lawmakers in Washington D.C. And let me Just
take a little aside and tell
you that our own Oregon
congressional
delegation is acutely aware of the value of that
waterway. For example, I directed Oregon State agencies to
work directly with our congressional delegation to ensure the
deepening of the mouth of the Columbia River and the critical
work at the Bonneville Locks.
This kind of work will be
essential as our trading patterns continue to shift, giving
greater emphasis to trade with the Orient. We now look forward
to the deepening of the Columbia River Bar by next year and the
Bonneville bottleneck also is on its way to being solved. And
here in a large measure, we need to thank Senator Hatfield.
- i v-
I find it refreshing to find Ports and shippers along
this important river system, ports and shippers that some might
consider to be competition, working together on your common
goals, not trying to determine who in fact is superior. Those
of you who are here this morning and who were former military
personnel know about the endless arguments that go on over
which service branch Is superior. The story that the Marines
like to tell concerns a group of Marines who were sent to an
Army base for airborne training. An Army lieutenant told them
they would be expected to Jump from an airplane at 800 feet,
regroup on the ground and head north. After the briefing
several of the Marines asked the lieutenant if the plane could
be lowered to say 500 feet. The lieutenant patiently explained
that at such a low altitude the parachutes would not even open.
To which one of the surprised marines replied, "You mean we
will be wearing parachutes." The point is that any competition
that the ports and the shippers on this system have felt has
not softened your common resolve to provide
the
best
transportation system anywhere. It has not softened your
resolve to work together in partnership to plan your Joint
future. And I sincerely thank you for that.
As Governor of Oregon, I know the value of the system.
I
consider
it
a vital
component
in Oregon's economic
development efforts. Oregon needs the Columbia/Snake River
system to promote itself aggressively as an
international
trading partner. Oregon's unparalleled efforts to secure new
international trade will contribute to an even greater growth
of traffic on this system - a system that has seen a tripling
of cargo tonnage through the Port in only 10 years and for all
of our Oregon ports as well.
The Germans have a
saying
about Americans that
illustrates Oregon's commitment to international trade. In
America they say "an hour is 40 minutes." Oregon is pursuing
its international economic development efforts with that kind
of energy, without the mistakes that come with careless haste.
I
must admit we recognize that our state was late in actively
promoting international trade. But we are making up for lost
time. We are providing assistance to companies interested in
expanding their export business. We published an exporter's
handbook to show Oregon companies the mechanics of exporting.
We are conducting overseas promotions, four in 1982 alone.
We
invite trade delegations from other nations to visit Oregon, to
talk
with
our
industrial
and agricultural
leaders and
suppliers. We have established sister-state relationships with
the Pacific Rim nations to further business and cultural ties
and I personally led a trade delegation to Japan, Korea, and
Taiwan.
Capt. Robert Gray named the Columbia River after his own
in
1792.
He was obviously impressed with the waterway.
He would be equally impressed today if he could see what you
ship
-v-
and people like you are doing with this important river system,
all the way from the Pacific Ocean to Lewiston, Idaho, on the
Snake River. I've been aware of the aggressive nature of our
trying to reach for uses of the Columbia River and the Snake
River as a transportation system. Earlier I had indicated we
were drawing from as far away as the Midwest. You know and I
know there Is keen competition between the Mississippi and the
Columbia systems. Where we thought of ourselves in small
terms, we are today in fact into the entire market of the
United States. Linking transportation, then, is important to
Oregon as an economic development effort. As you have tried to
talk to your colleagues about coming into our state, among the
things they talk about is the availability of transportation.
And you make that system better. And, of course, as you are
able to service the fleet of barges or tugs or ships, that
makes us stand out even more. So that is why I am here this
morning. Not only to kickoff your meeting, but to thank you as
a governor for your contribution to our economy. And to give
you my renewed pledge to the Columbia/Snake River System
battles as Oregon's battles.
CONTENTS
INTRODUCTION, aitLAL±kr.
PANEL:
Shipbuilding, Repair and Maintenance
The Portland Situation, Oeorg.e_Iidig/ 1
Other West Coast Ports, Scott
6
EJAZAbikt The Department of Defense Position, James_Beall 12
Foreign Competition and Pending Legislation, Dave_liu g i.. 17
Shipyard Labor in the Northwest, W1111.dm_51Adi 23
LUNCHEON SPEAKER: Transportation on the Columbia River and
Innovative Transportation Ideas, as1M_L1_ailkla 26
UPDATE, COLUMBIA RIVER AND NORTHWEST
Maritime Administration Office in Portland, Capt..
Emilan Igim
29
Proposed Liner Consortium, B.CliAnsl
32
Columbia River Customs District, Stevgn_liymn 35
Port of Portland 20 Year Master Plan, tacgery Abbott 37
Vessel In-Port Locator System, Dick_Lgaelansi 40
PANEL: Ocean Carriers--Conference Versus Non-Conference
Pro-Conference View, MichAgi_UrgmoviLl 42
Non-Conference View, Erik_Ealk gniLera 45
The Shipper's Perspective,
47
IlaylsLauffAm CONFERENCE SPEAKERS 49
LUNCHEON ATTENDEES 50
CONFERENCE ATTENDEES 51
INTRODUCTION
Capt. W. Gibson Carter
Marine Extension Agent, Portland Area
OSU Sea Grant Extension
After this, the tenth annual conference of The Future of
the Northwest Maritime Industries, I believe we have created an
instrument of value with characteristics of permanence. Its
strength perhaps lies
in the mutual support of the (a)
cooperating organizations:
OSU Extension Sea Grant
Portland Shipping Club
Portland Steamship Operators
Propeller Club of the Port of the Columbia River
Women's Shipping Club
WSU Cooperative Extension - Sea Grant
(b) the committment of the membership of the sponsoring
organizations, (c) the Industrious individuals from these
organizations who steer the conference, and (d) the flexibility
of the conference topics and agenda.
It has been pointed out to me repeatedly that one of the
special features of this conference is that each is different
in subject matter and to some degree those in attendance. This
overall industry support and conference flexibility is probably
our greatest strength. The steering committee tries very hard
to plan topics six months ahead and provide a program which is
timely, educational and of immediate benefit to a majority of
those associated with the Columbia/Snake River maritime trade.
I take this opportunity to remind you, this is your
conference,
dedicated to the Columbia River Basin and its
supporting industries. I am always searching for agenda items,
methods of presentation, criticism of previous programs and
ways to better serve those in maritime commerce. I want to
hear from you.
PANEL: SHIPBUILDING, REPAIR AND MAINTENANCE
The EQL±Land la.u.A±ion
a12La_e_litCk_e_y, Vice President and General Manager
Northwest Marine Iron Works
The
title
of this section is "Shipbuilding, Repair and
Maintenance," so I
think
we
should
say a word about
shipbuilding.
Let's say three words:
there isn't any,
unless
we consider the barge building that Is going on at FMC and
Zidell. And Northwest Marine Iron Works builds a barge once In
a while.
But there is
the capability in town for shipbuilding
if we ever have that opportunity.
The major thrust of our business is ship repair and we
are very fortunate to have probably the best ship repair yard
on the West Coast and as good as anything that I know of on the
East Coast. Everything is modern, everything is accessible.
Most of you people know all about the yard. But for those who
don't,
the Port of Portland yard is a publicly-owned yard.
Anyone can set up business there. Anyone who feels they want
to get into this business can do so at the yard and I am sure
David would be happy to rent you some space.
When congress determined the Alaskan oil would be
confined to domestic use, the Port asked the people to back a
bond issue so they could modernize the yard and the people did.
We put about $65 million into the yard to build Drydock #4, the
largest floating space there is,
and generally upgraded the
yard to a point where I think we can do anything. Basically,
we try to confine Drydock No. 4 to the tankers; however, it is
available for anything.
The crane capacities: we have 16
cranes from 45 tons to 200 tons, very modern cranes. We have
piped in gas, oxygen is piped around, we have a water treatment
facility that takes the bilge water and the slops off the
tankers or whatever ship, separates the harmful chemicals and
oil out of it, cleans it up and puts it back into the river.
We had an opportunity to tour the Newport News Shipyard.
They say their shipyard is the most modern in the world. They
were bragging that pretty soon they were going to put in a
water treatment facility. We are about 15 years ahead of them.
As I said, the new drydock was basically designed for
the Alaskan tankers. There are about 36 tankers on the Alaskan
run right now and between six and nine of them can only be
docked in Portland because it is the only drydock big enough to
handle those particular ships. We think that this same number
of tankers will continue to run, and if the oil production gets
-1-
bigger in Alaska we are going to probably see more tankers.
The tanker work Is almost 100 percent of the work we do in the
yard.
My company, Northwest Marine, is active in Navy repair
and overhaul.
This yard Is
ideally suited for Navy work. We
recently modernized one berth and we are going to modernize
another
one,
especially for Navy ships. It requires a little
more than the normal. We have to have sewage for it, 400 cycle
power, and a few specialized things Portland
for Navy ships.
is a good Navy town, the sailors like it; they used to tell me
it's
like they
It is hard to get
are on leave all the time. Navy in here though because we are not a home port. We are in
competition with the West Coast for Navy business. Frankly,
there is very little Navy business now. With No. 4 drydock we
can drydock anything that the Navy has, except we haven't
figured of a way to get a carrier through that railroad bridge.
The drydock is capable of battleships on down. We do most of
our docking of Navy destroyers on what we call No. 1 dock,
which is a 15 thousand ton dock, ideally suited for that sort
of thing.
(By the way, there are four drydocks at the Port of
Portland,
for those of you who don't know it. One, three and
four are excellent docks. David Neset is trying to sell No. 2.
It is a wooden pontoon dock. It is getting old, but it is a
good dock. Anybody who wants to buy a dock, I would recommend
you see David.)
The
bidding
practice
for Navy work has changed
considerably in the last few years. In the past, we had an
allocation system. The West Coast is divided up into three
Navy Districts.
The
13th District
includes Portland and
Seattle. Then there is the 12th and 11th Districts as you work
south.
And in years past, the Navy would allocate a ship to a
particular district and then the shipyards
in that district
would compete for that overhaul. That was nice because we were
all
competing, we all had the same wage rate, we all knew each
other and there seemed to be plenty of work. It was always on
an IFB, Invitation for Bid. Low bid gets the job,
regardless.
Well, now things have changed. The largest portion of
competition is on the total West Coast. When the Navy decides
they want to overhaul a ship they will request proposals, known
in the business as an RFP. Now with the proposal, the low
bidder does not necessarily get the job. The shipyards up and
down the West Coast each will prepare a proposal and they get
voluminous. We have to tell them our background, exactly how
we will do the job, work up the schedules, get into the finest
detail, and resumes of all the people who will work on the Job,
and this happens over and over and over. Every Job we have to
do the same thing. We have to explain the same thing. You
would think they would catch on after awhile, but that's how it
goes.
Most of the work we are doing now and in the past,
is
with
auxiliaries
and
amphibious
ships.
We
now
are also
overhauling ships of the line -- the destroyers and cruisers,
-2-
frigates especially, we have done a number of frigates. These
are considerably more complex than the auxiliaries but we have
been quite successful. We completed a Job
last year on a
guided missile destroyer, a highly complex Job. When the ship
came
in the yard, it looked like a garbage dump. There wasn't
anything on it working properly. We had a year's work, which
we completed in 11 months. The ship has been back in service
and we haven't had the first guarantee item. Everybody's very
happy with it and I
think
this speaks well, not only for our
company and our management, but also our labor force.
We do
have an excellent labor force in town.
Presently, we are not bidding anything, although we hope
to shortly. One thing about what we have done in the past. In
the
last 10 years we overhauled nine Navy ships and the total
value of those nine overhauls was $140 million.
Translated
into 1983 dollars, that
is
$178
million.
So that
is
a
significant
industry
in
itself.
I would guess that about 65
percent of that is direct wages. Probably 85-90 percent of the
total is spent right here in town: for wages, parts, material,
and so forth. The destroyers and frigates that we are doing
now are more complicated, so the cost and the value of the work
is considerably higher. We expect a rising graph of cost for
Navy work. The Navy has gone to a system of 5 years between
overhauls, which, as a naval architect, I think is dangerous as
hell.
In that 5th year you have a ship that isn't any good to
you.
When we see them after 5 years, there is nothing working
on them. I don't know what good a ship of the line is when you
can't fire the guns. However, this is the Navy's way of trying
to save some money, and I assume they are doing it.
Let me explain a little bit about another market in
town, the foreign work that comes in. We service the foreign
merchantmen that come into town, usually on the waterfront.
Very rarely, unless it is an emergency, will we see them In the
shipyard. They will not be drydocked, they will go back to the
Orient, or wherever they came from because the price is lower.
When they absolutely have to have something done to load or
unload cargo or get back home, they will call on us.
We service between 500-600 ships a year. The total
gross value of those 500 service calls Is about $3 million, so
you can see that each one is quite small. I would expect this
market to continue. I don't really think it Is going to grow
any, but who knows?
What can we expect in the future? Well, the Navy wants
a 60.0 ship Navy. I don't know whether they are every going to
get it or not, but they are certainly trying. As far as
overhaul work, this is good.
The more ships there are, the
more opportunity to overhaul. The largest number of ships that
the Navy will have will be destroyers, cruisers,
frigates
in
that class, which again we applaud because that is our stock in
-3-
trade. We like them, we like to overhaul that type of ship.
We will not ever see nuclear ships in here, but we really don't
care. There are a few nuclear cruisers around. They are
always serviced in the public yards, the Navy yards. I
would
expect that it will be two years before we see the overhaul
period start for the ships they are now building. The FFG
program and 963 class program will be coming up about that time
and there will be a continual run of overhauls. say,
As I
we
expect to see this in about two years.
The
tanker
fleet,
as
I
mentioned,
I think will not
diminish.
It may not grow to any more ships than there are.
In fact, some of the larger ships may be going on that
line.
However,
those ships will
continue to be available to us.
There is drill ing in the Gulf of Alaska. Maybe the production
will step
up
in
the
Gulf
I
of
Alaska,
although
heard a
disquieting note yesterday that ARCO abandoned one well.
It
was the most expensive drilling they had ever done and it was
in the Gulf of Alaska and they were in a dry hole. So we don't
like to hear that. I expect they will move their gear and try
again.
I hope so.
As for the dry cargo fleet, we will
continue to see
wheat exported.
This is usually exported on foreign bottoms.
A little work
is
available there.
As for breakbulk cargo,
again, I think that all we will see is
container
ships.
think that the old days of ships with masts and booms are about
gone.
However, there is some pending legislation known as the
Lindy/Boggs Bill that, if
passed,
would
lead
to a building
program for cargo ships in the U.S.
When I was flying back from Washington last week, I
was
reading an article in
magazine about nuclear energy.
There was a very interesting section
in there about a poll
taken by the Research Institute of International Awareness at
Columbia University. This
poll
was taken of scientists,
industrial leaders, and government leaders and the amazing
thing to me was that 84 percent of these people think that by
the year 2000 coal will be our major source of energy. Now it
was followed by oil,
natural
gas,
nuclear fission and solar
heat, in that order. I think we are going to have a coal
facility in town. If there is anything to this poll, if these
people know what they are talking about, we should expect to
see coalers in town. As a matter of fact, we should expect to
see a great number of them.
So, it is a possibility for future
work.
Aflarlic.
QUESTIONS AND ANSWERS
QUESTION:
You
said you didn't do any new ship construction.
Would you consider doing any?
-4--
Tucke.y: The only facility right now for new ship construction
is at FMC, who are friends of ours and we are exploring new
construction with FMC. They would like to build the hull
itself; they would like us to take it from there and do the
outfitting and finish the ship. Yes, we are pursuing this, but
there Just isn't any availble right now.
ElizyLateL:
I can add to that that Dillingham Corporation
routinely solicits bids to build its tugs and barges and we are
offered that opportunity. As a matter of fact,
I know
Northwest is.
But as a practical matter there is so much
capacity available throughout the U.S. that it's Just not
realistic for us to start up that business here at this time.
To say that we would never do that, we couldn't say that.
There is a good shipbuilding tradition In this area. But again
it is a matter of economics that is holding us back at this
time.
QUESTION:
George, what portion of your business is slanted
toward MSC, Military Sealift?
Well,
when the Military Sealift Command has work
available, we bid it.
Over the past
10 years,
probably
15
percent of our work was MSC.
Beall: One comment that I might make is, George touched on the
favorable treatment that the Navy personnel receive when a ship
like the U.S.S. Wilson comes into the Port of Portland. I Just
want to reemphasize what George said. When I am back in
Washington D.C. talking to Navy personnel, I hear that every
single trip. "You are the people that really put on a show for
our people out there." Well, we do, we treat those people
very, very well. It is partly attributable to the Governor, to
our congressional delegation, the City Club, the Navy League,
the Chamber of Commerce, the Mayor and the entire northern part
of the state turns out for those people, and we really do put
on a show for them and they remember it. I had one other
comment.
George touched on the amount of work at the Newport
News yard we saw last week. You might also elaborate on the
difference in working conditions at Newport News. We have
approximately, at Swan Island, 1000-2500 workers; it goes up
and down, obviously with the amount of work. They have almost
29,000 in the Newport News yard, but I'll tell you when you go
out here to Swan Island, those people are humming. They are
really working hard. At the Newport News yard, we started
counting to see if, in any one area, at least a third of the
workers were working or looked like they were doing something
other than talking to the person beside them.
Tuckey:
I
There was a
there were
are talking
think about 10 percent was the best count we got.
group of people lifting up a little kingpost and
15 people standing around that kingpost. Now you
about a two man job. I don't know where the money
-5-
is coming from I know where the money is coming from, the
government. It is an indication that Scott and I, of course,
always complain we are not getting enough production out of our
people, but when we see something like that it makes me feel a
whole lot better.
Beall: We also received very good marks from the Navy on the
housing,
the module housing that we had out at Swan Island
during the overhaul of the U.S.S. Wilson. Some of you may know
that it is under new ownership and
I
might ask George to
elaborate on that.
Ille.h.e4: What you read in the paper wasn't true. Those units
were under
lease, the lessors sold the units to the Rajneesh,
not Northwest Marine
Iron Works.
They are dismantling the
units. Going to take them to Antelope, I guess. But
if we
ever have a need again, we can lease some more units and put
them on the same site. Northwest Marine Iron Works was not
dealing with the Rajneesh.
QUESTION: Do you have any information on the subject of 70/30
versus 50/50 splits in private yards versus Navy yards? What
do you know about that?
Beall: We have some tentative information on that. That is
one of several issues that Congressman AuCoin has been working
on with his new position over at the Defense Subcommittee of
the House Appropriations Committee. They held an executive
session last week, executive meaning private, the public was
not allowed to attend. But we spoke with several of the key
staffers that work for Chairman Adabo afterwards and in the
middle of a number of other issues that I'll discuss later,
they said that the 70/30 split was addressed and there is still
a possibility that there will be some adjustment. By the way,
the 70/30 split refers to a Navy administrative policy of
overhauling 70 percent of the ships in Navy yards, 30 percent
in private yards. We will not know the outcome of that until
they go to the full committee.
The
Llikaiisan in
laher Na5A_Lp ast EDLil
Qtt EitiNA±gr, President
Dillingham Ship Repair
This is
expect, because
about what
is
an opinion.
I
a very tight
lipped
industry,
as you might
it is also a depressed one. So when
I
talk
going on in other ports, I am really expressing
might also preface my comments by stating I
-6-
believe our interest in other ports is in a comparative sense.
We are not particularly interested in what they are doing that
we can't do, or never would be able to do because of the
different markets, but in the sense that we actually compete
for the same types of work.
Some other general comments: As
I mentioned, the
industry, worldwide, is depressed. That is primarily a market
problem.
In the U.S. it's worse off; not only is it a market
problem,
but
it
is a competitive problem.
As George alluded
to, we have costs that, by the world's standards, are simply
too high. It is primarily a factor of labor and there is no
way our labor rates will ever come down to the point where they
are competitive on a worldwide standard. So we are not asking
our unions to try to come in line with international
competition. Our purpose in getting any kind of wage freeze or
wage break is to get ourselves on a more or less equal footing,
at least within this country.
Right now the Pacific Northwest
is a little higher in its wages.
The West Coast shipbuilding and ship repair industry
essentially was built in World War II and obviously the demands
on the industry were much greater then. Since then the market
has shrunk and the facilities have remained essentially static
with the notable exception of Portland. Outmoded facilities
and excess capacity make for a very competitive situation. I
guess you would have to say that a house cleaning is underway.
Management is trying to get some relief on wages. Some of the
shipyards have closed. There are examples in every port where
there is a squeeze on. In spite of that, the shipyard in
Portland has flourished. During the last two years the economy
has been bad,
but this shipyard has probably enjoyed its
greatest success. That is not the case in 1983, but I
have
every reason to believe that we can return to prosperity. I do
not believe for a moment that the kinds of disputes we are
having with labor are the things that will cause us problems in
the long run.
We are a mature
industry.
You could call
us a
smokestack industry.
You could call us a sunset industry. And
that is one of our political problems:
does the community
really need us? We feel they do;
we certainly need your
support.
You are going to need shipyards in every port if you
want to sustain shipping. The adjustment to the market is
going to be painful for allofus. But I believe the people on
this panel are up to the task. We have certainly shown that we
can compete in the last two years and I believe we are the envy
of the Industry, particularly on the West Coast.
With that let's start going down each individual port on
the West Coast and I will try to make some comments as to where
we stand relative to each.
-7-
Starting with Vancouver, which is not a domestic yard,
but a foreign yard. It is also an excellent one. There are
actually a couple of yards there, one in the City of Vancouver
and one on Victoria. The one we are interested in Is the one
on Victoria. It is a facility designed to compete for the
large ocean going vessels. They have facilities that are at
least comparable to ours in quality and in general efficiency.
I would not say
in any fashion that we enjoy a competitive
advantage over the Canadians in this regard. We do have a
larger drydock and that has again given us some advantage on
the larger tankers, although it
is only a few ships we are
talking about. But they have a graving dock and we do not. A
graving dock offers some advantages to ship owners during
repairs for the type of alignment work that might be required
on some ships. Most notably this seems to be a factor giving a
lot of Sealand work, U.S. flag ships, to the Canadians.
They tell me the work ethic up there is quite good.
That the wage rates are in fact a little higher now, in an
absolute dollar sense.
But when you devalue the Canadian
dollar, they are comparable or even a lower.
little
They
compete with us primarily for foreign flag work, for barges,
that sort of thing
that
might
be
driving by.
And
unfortunately, recently, they have been given an opportunity to
compete for Military Sealift Command vessels. Though they
haven't been successful,
they have put in very credible bids
and they have been higher than what we would have been able to
respond with. I think they also enjoy some advantages in not
being restricted in how they compete internationally. The U.S.
has set up its own code of ethics and I don't want to knock it
in any great sense. But certainly our standards of how one
competes are not the same as the world's. I don't know, by the
way, the estimated employment in that area. There is some new
construction
going on
as
well
as
ship
repair.
I believe
employment
is certainly steady
and
probably will increase
because they have a strong hold on any demands the Canadian
Navy has for work. They have a brand new floating drydock,
about 150 feet wide. Dillingham Corporation graciously dredged
the hole for them.
Anyway, they are going to be around for
awhile and they are going to be a factor in our business. If
the MSC continues to allow them to bid on their contracts, it
is only a matter of time until they succeed.
I view them as
our equals at this time.
Seattle is a very large ship repair market and there
is
a large ship repair base there. The primary yards are Tacoma
Boat, which is mostly new construction, Lockheed Ship Building
and Drydock (they are primarily new construction) and Todd
Shipyards.
The other notable one is rpobably Marine Power and
Equipment.
Employment
is around 8,000 people
in the area.
Again, most of them are focused on new construction, they are
not competing with us. However, Todd is. Todd has a nice
facility, a large drydock. They are kind of getting out of the
-8-
new construction business and presumably will get their costs
in line. To date they haven't been that successful in
competing head on with us for the tanker business. They are
very successful, however, in the Navy overhaul market. Tacoma
Boat is an interesting company, perhaps Bill Slack would like
to talk about them a little bit. They are the only ones openly
bucking the strike situation at this time, probably because
they are under some severe cash flow problems. But they
certainly have grown in the last few years. Again, they
focused on new construction, although they have ordered a new
drydock and they may be a competitor with us also. Overall, I
would say that the quality of competition from the North is a
little grade below us on the commercial side and certainly our
equal of the Navy side.
George talked about Portland. We are two different
companies, we both hold master ship repair contracts with the
Navy.
George is competing, we are not. But that is a matter
of choice at this time.
San Francisco and the Bay Area is a smaller market and a
smaller base.
I believe there are probably no more than two or
three thousand shipyard workers in that area.
The largest
employer would be Todd, which now occupies the former Bethlehem
Ship Yard.
The other
notable shipyard
is Triple A,
which
occupies
a beautiful
facility,
the Hunter's Point Naval
Shipyard.
Both of those,
in terms of facilities, are probably
very competitive. Portland has a slightly larger drydock, but
Hunter's Point has a graving dock which is an advantage. Both
Seattle and San Francisco have battle groups, or will have
battle groups stationed there. That is, Navy ships that
weren't there before, which obviously is a market advantage.
Both ports also have an advantage in the sense that the liner
trade which we are no longer getting is still calling in those
ports. I have heard of a concept of superports where as the
ships become more sophisticated, more expense, it makes more
sense to use a few ports than a lot. Bring the cargo to the
ship rather than the ship to the cargo. That probably doesn't
speak well for Portland and would also not speak well for our
industry.
So there are quite a number of competitors in the San
Francisco area In addition to Triple A and Todd. Most of them
are dedicated to Navy business. They don't have drydocks.
Although there are a couple of facilities still
there and
presumably for sale if you would like to buy them. One is the
former Todd yard in Alameda, and the Port of Richmond has taken
control of a former Willamette Iron and Steel shipyard in the
Richmond area. But there are companies called San Francisco
Welding,
Pacific Drydock Service Engineering, Southwest Marine
(non-union), and a number of other small ones. It is a highly
competitive area. I would hate to be in business down there at
this point. I think they suffer from much too much capacity.
-9-
Again,
they are very credible in the Navy contracting bidding
area, a little
They
less credible
in the commercial area. don't enjoy quite the reputation they should have with some of
our customers.
And I could also say in all honesty that even
though we have the same labor agreement, the same wage rates,
far superior
that the work ethic in Porland, In this case, is
to down there. Our work ethic relative to Seattle is much the
same.
Although the larger the yards, generally the more
difficulty you have in getting good production. So by being
relatively small here in Portland, we do have an advantage.
In Los Angeles, Long Beach is the largest port area on
the West Coast. Surprisingly, there are very few viable
competitors for the ship repair business. We have another Todd
yard down there which is focused on new construction, but it
does
although they are not
have a ship repair capability, competitive in price. They are getting a marine railway, which
presumably will
be used to attract
larger Navy overhaul
contracts. Southwest Marine is a non-union company that has
taken over an old Bethlehem shipyard there. They are having
some problems getting a good identity with our customer base.
And there are a number of small I am
topside contractors.
estimating the employment in the area of about 7,000 and
probably
it will be declining unless the Todd yard can obtain
new construction contracts. They are the primary employer.
But L.A./Long Beach again has that advantage of all the
primary liner ships calling there. Lots of Navy ships are
home-ported there or in San Diego. Many of our ship owners
have offices In the L.A. area. it is very convenient for them
to use those people and they have a very strong political voice
in Congress and locally. The disadvantage is that, at least in
terms of tankers, that's an offloading, discharge port and most
repairs have to be accomplished in a gas free condition. So
tankers,
if they want to get repaired in L.A., have to sit
around for awhile while they get cleaned. Whereas if they want
to use Portland, they can steam in the general direction of
their next cargo while they are cleaning and divert at the last
second. So we have some cost advantage for that trade.
Last but not least, San Diego is a hotbed of naval
activity.
There
is one major employer, National Steel and
Shipbuilding Company.
I
think
they are employing about 6,000
people. I estimate among the 11 other smaller yards, there are
about 2,000 employees. There is far too much capacity of a
certain type for what the Navy really needs down there and it
has resulted in a lot of cutthroat bidding, and perhaps some
unethical practices. As a result, the Navy business in that
town has gone down significantly. Perhaps it has helped get
some battle group stations up and down the coast, but again the
political process probably favors some support for the industry
In that area. There is a non-union outfit down there that was
very successful in getting a new drydock. But there are many
-10-
examples of shipyards that are not of any great quality. They
are a desk and a phone, a lot of subcontractors, that sort of
operation. And the Navy is particularly upset with that
process. Of course, they are the only ones that have the power
to do anything about it. I believe George and Jim have
mentioned this and we will probably mention it some more; we
are trying to make this point with the government to see if we
can't get more favorable treatment from the standpoint of the
quality that we offer.
The advantage they have, other than the proximity to the
Navy market is that labor rates in the San Diego area are
significantly lower than anywhere else on the West Coast.
Probably offsetting that is a lower work ethic. There are some
radicals
in the unions, some wild-cat stoppages, that sort of
thing.
And again many of the competitors are really not
qualified,
by our definition, to do the work.
From a
performance standpoint, National Steel
is a very
strong
competitor, whether it be new construction or ship repair. I
think they are in the business for good and our strategy there
would probably be to keep them happy with new construction so
they will leave us alone.
I might add, I think I totalled up about 25,000 shipyard
workers on the West Coast. I am probably grossly off, let Bill
Slack talk about it, but I made a stab at it anyway. In
addition, there are three public shipyards on the West Coast
employing what I believe to be about 30,000 people. So we have
a number of private contractors employing small groups and we
have three huge public yards -- inefficient yards that are
employing even more people. That is one of the ironies of this
business that we need to deal with.
QUESTIONS AND ANSWERS
QUESTION: Have you heard a rumor that Lockheed is about ready
to move out of Seattle?
Ei±zycLter:
I haven't heard that one. George, have you heard
that one?
(No.
We will add that one to our list.) That is a
good rumor, repeat it often. Shipyards don't move very easily
and I find that hard to believe.
But I would never say no.
QUESTION: Recently at National Steel in San Diego I saw
1600-3000 people working. We are not working up here. Can you
comment on that?
t:
Fitzw_dig The labor situation, why we are on strike and they
are not, is that what you question was?
The contract with
labor that we have encompasses just the major shipyards in San
Francisco,
Seattle
and Portland, with the exception of
Lockheed. Lockheed is not on strike and the rest of us are.
As far as L.A., I believe the contract expired there also with
Todd and I don't think they are on strike. I think they are
negotiating. The eight smaller yards are on strike and so
there are quite a few yards on strike and that is a separate
labor agreement.
In San Diego, each yard has a separate labor
They are what we call
agreement with a particular union. vertical agreements where one union
is affiliated with one
National Steel, I
shipyard and, of course, some are non-union. believe,
is under the
Iron Workers of America, and probably
some of the others have a separate agreement down there. So I
really don't know at this point if any of those yards are
renegotiating their contracts or whether they are not on
strike. The lack of work probably means they are not doing
much regardless. We have not heard of any strike situation
down in that area.
Our contract only affects the major
employers in the Pacific Northwest.
The DvparImkni_Qf aeig n5_g
Esarspkcilyt
lAmg_fakAii, Attorney
Garvey, Schubert, Adams and Barer
It has been said that if our congressional delegation
was just a little bit more supportive of the votes on the
defense budget that we would have more ship overhaul work in
Portland, Oregon. Well, if anybody here believes that getting
overhaul work in Portland is as easy as getting one of our
senators or congressman to vote yes the next time the D.O.D..
Defense Appropriations Bill comes up, I have a little property
down in the Everglades we might talk about over coffee. For
decades, agencies have attempted to protect their programs and
increase their budgets by putting pressure on the congressional
delegations through their constituencies. But if you look up
find very
and down the West Coast at San Francisco, you will
little relationship between their votes on defense spending and
the amount of work that they have. There are historical
reasons why our defense people are located where they are. And
In many cases, we have seen where those who oppose the D.O.D.
the strongest and give them the most trouble are having some
relative success in landing overhaul contracts.
On the other hand, I do think it is important for our
delegation to develop a very keen understanding of the defense
contracting process, how the bidding process works, and how the
schedule of overhauls and other procurement programs affect us
here in this state. I think that it is very important for them
to understand how certain key actors in various branches of the
government can make or break a contractor here in this state.
-12-
But as one who works very closely with our congressional
delegation, I would like to point out that our two Republican
senators and our two Demoncratic congressmen from the city are
doing a heck of a Job in developing that understanding and
developing the key relationships with the people over at the
Department of Defense.
I would like to spend a few minutes just touching on a
few of the subjects that are coming down the pike. We have
mentioned a number of them and I will try to skim over them
very lightly.
First, the schedule of Navy work, the schedule of
overhauls, or what we call the planning matrix. In the short
term it is an absolute disaster, even though we just completed
the overhaul
of the U.S.S. Wilson, which pulled out in May.
There is only one contract for a Navy overhaul that Portland is
even eligible to bid on through fiscal
year
1 84, and it is
going to go out under the IFB, the low bid process that George
is talking about. Unless we get that bidding process under
control, the Northwest ports are going to have a very difficult
time in landing that contract. But again, there is only one
contract.
The problem is nationwide. I believe the planning
matrix for fiscal year 1 84 has only 49 overhauls on it,
nationwide, whereas last year there were 61 and in fiscal year
/85 there is a plan for 65 overhauls.
My personal view is that the only chance we have of
landing
additional
bidding
opportunities,
additional
opportunities to compete in other words, is the action being
taken right now by the Appropriations Subcommittee on Defense
over on the House side. Les AuCoin, I have got to admit, has
been a real tiger for us on a number of these areas. He is
dealing with the 70/30 split and he is attempting to shake out
some additional overhauls.
There was a rule that all Navy overhauls be restricted
to the home port except where there was not adequate
competition, or for some other reason the local superintendent
of shipbuilding was allowed to throw the bidding open on a
coastwide basis. About a year ago, due to the efforts of our
congressional delegation, the Navy changed that rule quite
significantly and now the rule reads that the Navy is allowed
to open up to two-thirds of their major overhauls for coastwide
bid and restrict one-third of their major overhauls for the
home port area. But of course, they still restrict all of the
SRA's, the two and three month jobs that can only be done in
the home port. Currently, it is my understanding there are
over a hundred vessels home-ported In San Diego, approximately
20 in San Francisco and, although this figure changes from time
to time and is not reflected In current Navy documents, I
believe there are only seven now home-ported in the Puget Sound
area.
-13-
As I mentioned, Portland is not within the home port of
Puget Sound. Senator Hatfield Is toying with an idea that
would change that definition to basically define Puget Sound as
Including the Port of the Metropolitan Area. So one way to
handle it is to Join them. Scott touched on the battle group
that is scheduled to go into Seattle. We talked one time about
writing to the logistical planning group for that battle group
to see what we could do down here in Oregon. They told me they
had started out with a game plan of one carrier and 16 surface
combatants from Puget Sound. They are now down to a carrier
and either four or five surface combatants and that decision
will
be made in a couple of months. The decision on where in
Puget Sound to home port those vessels will be made by the end
of the year. Their current game plan is to conduct an
environmental
impact statement study throughout 1984. Then,
assuming that the study Justifies their preferred site
selection, go into site preparation for 1985/86 and finally, in
1987/88 actually locate the ships there. So whenever we talk
about home-porting we all get pretty excited. You have to
remember how long it takes to study these things, prepare
sites, and put facilities in place, even in a place like Puget
Sound where they have the Navy crawling all over. I, of
course, am discussing with numerous people back there what the
Portland situation is and it is not good. Neither the
strategic planning group nor the logistical planning group are
considering any Oregon ports at this time.
Both of our
senators
have
had some preliminary
discussions with Secretary Lehman. I might add that Secretary
Lehman and recently retired Assistant Secretary George Sawyer
started this big push to geographically diversify the fleet.
Obviously to get away from the Pearl Harbor syndrome. They
have been very pleased with the Northwest ports, both Portland
and around the Puget Sound.
(Many of you may remember George
Sawyer when he was out with a private consulting firm, before
being Assistant Secretary. He was head of the planning team
that was making the determination on whether or not Portland
ought to invest in that large new drydock.) But in any case,
currently the outlook is bleak.
There is no study on the
boards. As I mentioned, both of our senators are doing some
preliminary talking to people. If we can get a study in place,
it is going to be very important for the northern Oregon
community to get involved -- through the Navy League, the City
Club, the Chamber of Commerce, things of that nature. The
Governor has offered to put together a planning team from this
end to work with the Navy to ensure that there are adequate
facilities -- health care facilities,
housing, things of that
nature. Again, I see that as a very long term effort.
We touched on the Military Sealift Command.
There is
one vessel
called the Observation Island. It is a six-month
Job to start in January. Both Oregon contractors are bidding
-14-
on it. The bid process through the Military Sealift Command
was a two-step process. Basically, they looked at proposals
from all the yards.
I
believe there were 11 that submitted
proposals up and down the West Coast. They weeded out more
than half of them because they are very concerned that they get
this ship back on time. It is actually owned by the Air Force,
loaned to the Navy, operated by the MSC and everybody has a
piece in it. But the one thing that everybody agrees on is
that it has absolutely got to be back on some date in early
July.
Obviously Portland has a little advantage there. They
just returned the U.S.S. Wilson, supposedly a twelve month Job,
in 11 months.
The Navy was very, very impressed with that.
That may give us at least some slight leg-up. It reflects well
on our work force and everybody here in the community. But as
I
say, both Portland yards are competing for that job. It
would put a lot of people back to work for at least six months
and we are keeping our fingers crossed.
I
believe the
announcement will be made October 7.
Now we have all talked a lot about this bidding process.
Scott talked about the over-capacity in San Diego and he is
absolutely correct. Competition down there is Just
unbelievably cutthroat. My concerns are a little different on
that.
My concerns are that somebody is making up an awful lot
of money after the bids have been opened and the Job has been
awarded. I don't know if that's exactly what the supervisor of
shipbuilding in the Navy is doing down there, but we have been
collecting data on bids in both the commercial areas and the
Navy area. If you could see those figures, it is absolutely
remarkable. When we are competing for a Job with Exxon, or
Mobil, or ARCO, or somebody like that, Scott will pick one off
and the next time George will pick one off, next time Todd
Seattle will pick one off, and maybe San Diego will pick one
off.
But
it is incredibly fair and more often than not, our
bids are lower than San Diego's. And then I can show you the
last four Navy ships and it will just shock you that they are
all
coming in at about 50 percent of what we are coming in at.
There is something very unfair going on here.
Again, I mentioned that Les AuCoin is looking at it on
the House side, Senator Hatfield is looking at it on the Senate
side. One idea that some people have been floating is going to
an RFP, request for proposal, for all major overhauls and just
dumping the IFP process altogether. So you have got to submit
a proposal and be able to justify exL.c.tly what you are going to
do with that ship; what are you going to open up; if this is
wrong, what are you going to do; who is going to work on it;
how much it is going to cost. Those proposals are often five
and six volumes, but the Navy is always ensured of getting a
contractor who knows what he or she is doing.
Coast Guard overhauls. Senator Packwood is going to
take up this bidding problem with the Coast Guard to ensure
-15-
that the difficulty we are now having with the Navy does not
happen when the Coast Guard cutters are put out for the
overhaul schedule, I believe beginning late next year. Senator
Packwood has been a real tiger for us on that and I am
marginally optimistic that we have a shot at it. If we can get
the first one, there is about eight years worth of work there.
He is chairman of the Senate Commerce Committee, a very
important committee that has jurisdiction over the Coast Guard.
A couple of miscellaneous items. We are working on a
number of smaller government contracting programs, but we won't
go into those. We are watching very closely who will become
the next Assistant Secretary for the Navy for shipbuilding and
logistics. As I mentioned, George Sawyer has recently resigned
and taken a position in private industry. We are very close to
a career officer in that branch of the Navy named Everett Piet.
Piet
is
very
impressed with Portland. He is particularly
impressed with the Job Portland did on the U.S.S. Henry B.
Wilson. We are, of course, pulling very strongly for him. He
was proposed by the Navy and by some circles in the White House
as the next Assistant Secretary. The Navy wanted one of their
own for the first time ever. It was held up because he had
received some promotion during the Carter Administration and
it's
being used again him. It is still up in the air.
We are
hoping that he gets it.
There is a new Deputy Commander over at Naval Sea
Systems Command. Again, this is a very key position.
Commodore Platt has held that job. He is a very good friend of
Northwest Marine's and the Portland area. He is very impressed
with the facility.
We have had him out a couple of times. He
has gone on and taken a new position that has never existed
before.
He is working with us a couple of proposals. But his
replacement
is a gentlemen named Captain Bill Hallinstein, who
I know some people in the room have worked with on Navy
projects in the past. We are hoping to develop a very close
relationship with the captain as well.
In summary, I think it's a competitive market out there
with a commercial market
just absolutely going to pot.
Everybody has put additional pressure on the Navy. You can
hardly get in to see anybody back there anymore. Lobbyists,
lawyers, representatives are lined up down the hall. Everybody
is trying to get a piece of the Navy action and it is going to
be very difficult. But I think we have a pretty good team here
in Portland and I thin "( one way or another we are going to get
apiece of the action.
QUESTIONS AND ANSWERS
QUESTION:
The quest an dealt with private versus public
shipyards on the West Coast.
-16-
Beall: There are Navy yards -- public yards -- up and down the
coast. Bremerton recently announced they were adding 800 new
employees to take them over 13,000 in their Bremerton yard. Of
course, at a time when our people are out of work, we Just
couldn't believe it. We immediately were in contact with the
Navy and they said that at that time about 80 percent of their
work up there was nuclear. None of the private yards were
eligible to touch it. But they did say that the percentage,
which at that time was 80 percent goes up and down, depending
on what's in port. There is work up there that should be
thrown out. One way to do it is through the 70/30 split that
the gentleman down here was referring to. Another is Just to
take specific overhaul contracts and kick them out for
coastwide bidding. We are trying to work a two-pronged
approach.
ir2m_AiLdItn.Q g :
I think there is an important part
gained that needs to be discussed in seeing more Navy work
available to non-Navy shipyards on the West Coast. And that
is, a study was done by the National Shipbuilders Council which
indicated the cost of performing this work in a privately
operated shipyard where a price was given or the estimate that.
was given was considerably less than the ongoing costs of doing
business
In a publicly operated yard where they did not
actually track the cost as accurately for their own region.
LLaMMDM±
agail: That is a good point, my understanding is that the
Shipbuilders Council of America is attempting to do a study
comparable to the one that was done several years ago and I
know that both Capt. Bondi and Lt. Cdr. Marchetti over at
NAVSEA both believe that it is more expensive in the public
yard.
LteEgian_Lp = g iii_IQD. ALA_ Pgn_dina_Lk41111_41±LO
►
Neagi, Director, Marine Services
Port of Portland
The
topic
of
my
particular section is foreign
competition and pending legislation. I would like to approach
that in the context of Portland's recent ship repair expansion
effort.
As you are well aware, in November of 1976 the voters
of the Port District approved an $84 million bond issue. The
largest ever to receive voter approval in the State of Oregon.
The purpose was to expand our unique ship repair facilities.
-17-
And
I
use the word unique in the sense that our yard is owned
by the Port, a public agency, and the facilities are leased to
private operators to compete for work in a variety of different
markets. The reasons we needed to expand the yard were two in
number.
First of all to keep what we had; and second of all,
to take advantage of the new tanker market which we foresaw.
Let me explain just a bit
further.
Our studies
indicated that the t raditional
market on which we depended,
U.S. flag vessels and scheduled service, was in decline. Also,
the ships that would be available were getting larger and our
facilities would become p rogressively less adequate to service
the market. Our studies also indicated that the only real
growth opportunity would come in the tanker trade as a result
of the discovery of oil at Prudhoe Bay in Alaska. These two
factors, one a threat and the other an opportunity, led to our
ship repair yard expansion program.
We can report today that the program has been quite
successful. The industry has been preserved in Portland and
some 2,000 jobs have been saved or created, depending on your
point of view and the timing. And the tanker repair business
has been on the order of $140 million per year. But we must
also report that the future is an uncertain today as it was in
1975/76 when these planning studies were done. It is true that
we have in excess of 80 percent of the Alaska crude oil tanker
business.
It is true that we have the best physical plant on
the West Coast and it is true -that we have a reputation for
quality work from a skilled work force. But it
is
also true
that the U.S. liner fleet has been reduced through bankruptcies
(reference States Line and PFEL), that very few U.S. cargo
vessels call on Portland, that many
U.S.
vessels repair
overseas, that our traditional share of Navy work has been
eroded, and that all of our business is threatened by potential
changes in federal policy or law.
It would be helpful if we all
understood
some of
the
basic competitive facts about ship repair. Based on some
surveys that we have conducted, to the ship owner, quality work
and fast turnaround are as important if not more important than
price.
Secondly, we have the facilities, the firms, and the
qualified work force to give the vessel owner a fast, high
quality
job.
Third, others have similar capability and have
lower costs in what is a very labor intensive industry. Some
examples of hourly wages as reported recently by Lockheed are
as follows: In the Pacific Northwest an hourly wage, not
including fringes, is $13.49, in Japan an hourly wage of $6.77,
in Taiwan $1.86, and in Korea $1.72.
With these wage differentials, you
may well ask how it
is that we get any business at all. There are basically two
reasons. There is a federal ban on the export of Alaskan crude
oil
and,
second, there is a 50 percent ad valorum duty on the
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cost of repairs when a U.S. vessel receives non-emergency
repairs in a foreign yard. These two
laws,
working
in
combination, and let me stress that, the combined effects of
these laws are what cause the tankers to come to Portland.
Both of these laws are being challenged in Congress as we sit
here this morning.
The Export Administration Act, which
contains the crude oil
export ban, expires on September 30,
1983.
This is about 11 days from now. The administration
is
promoting its renewal without the ban on the export of oil. I
should also add there appears a very substantial sentiment in
Congress in support of the ban on the export of Alaskan crude.
But we could very well get to the end of the month and see the
expiration of the Export Administration Act without a renewal
on the ban.
If that should occur, I am no lawyer, but it may
be possible to initiate the export of oil from Alaska. The
administration's maritime policy initiative, which is contained
in HR 3156, proposes a repeal of the 50 percent ad valorum
duty.
Now if one or the other of these changes in law were to
be enacted, we would see the disappearance, in my opinion, of
the tanker fleet from our shipyard. We fully expect, however,
to retain both the ban on crude export and the 50 percent duty.
But let us understand very well that failure to do so would
bring about the demise of the ship repair industry in Portland.
These
legislative initiatives of an administration that
maintains it is supportive of the maritime industries in the
U.S. -- difficult to understand how they come to that
conclusion -- are even more ominous when placed in the context
of earlier initiatives. These
include the termination of the
construction differential subsidy program. U.S. ships were
built in U.S. yards with a subsidy from the federal government;
that subsidy has not been funded during the duration of the
Reagan Administration. There
was a temporary grant of
authority of U.S. flag-subsidized operators to acquire vessels
from foreign yards. A subsidized U.S. operator can buy a ship
in Korea and enter it into the operational differential subsidy
program and have its costs of operation subsidized by the
taxpayer. As mentioned earlier, the extended Navy repair
cycles where ships are not going into yards as frequently as
some might believe they should and the supposed savings to the
taxpayer.
These
extended
availabilities,
or
reduced
availabilities, for
repair
are having an impact on business.
We have also talked about bidding policies, home-porting
policies, fixed
pice
bids,
RFP;s,
split
bidding, and small
business set asides. The cumulative effect of all of these
policies,
which
individually
may
have substantial merit and
justification, is to
bring
the
ship
repair and shipbuilding
industry to the brink of disaster.
I might add there are other initiatives which have been
proposed which also have an ominous ring to them. One being
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the CDS payback, the permitting of foreign flag vessels to be
reflagged to carry U.S. government
impelled cargoes,
and
allowing the construction and acquisition of foreign vessels
with money set aside
In tax deferred capital construction
accounts. Again, each of these things taken individually
doesn't make too much difference, but the cumulative effect Is
very serious. The effects of all of these changes have been to
empty U.S. construction yards, except for naval construction,
and force all the yards to pursue repair work in the two
available markets: the Navy and U.S. flag cargo ships. The
competition for the available work on all coasts has been
heightened as a result of the cumulative effect of all these
policies.
The best example of this
is
in our own neighborhood
NASCO and it has been discussed earlier. Their forte in the
past has been new construction. However, because of the lack
of work due to these federal laws and policy changes, they have
entered the repair business -- and believe me this is a new
development.
All
they did was build nice big tankers and we
got to repair them. But now they have entered the repair
trade. They have been rather successful at it, sufficiently so
to order the construction of a new floating drydock. And they
have been particularly effective in recent competition for Navy
work,
specifically the Cook,
and the Hepburn which were
recently awarded to San Diego yards.
I suppose in summary, we have to conclude that the ship
repair industry is dependent totally on federal policy and law.
As I indicated, the recent actions of the administration have
emptied the order books of shipbuilders, and created a
situation of excessive and growing competition in a shrinking
marketplace. The effect of this has been reduced employment
opportunity in Portland. Proposed legislation changes, the
lifting of the ban on the export of Alaskan oil and the
elimination of the 50 percent duty on foreign repairs would
turn a difficult situation in Portland into a disaster. We
must continue to work with our congressional delegation to
protect our industry and to preserve jobs for our people.
I would, to close off this doom and gloom look at
reality, try to conclude a little bit on an upbeat note. We
faced a similar situation back in 1975 when we were looking at
a declining ship repair market.
As I indicated earlier, we had
some threats and we did identify an opportunity,
and we
responded as a community with approval of a very large bond
issue, which had the effect of preserving 2,000 Jobs. And as I
indicated, brought in sales for tanker repair of $140 million a
year.
That had an impact in this area estimated at perhaps
$840 million.
It is not a bad return on investment. That $840
million is
using
an
economic
multiplier
of
six
which was
developed for us by the Maritime Administration. They can take
issue with the figure if they wish.
But It
is
a
substantial
-20--
benefit to the community. We, in this industry, are doing all
we can to assure that history will repeat itself and that we
will successfully face the challenges of the future.
QUESTIONS AND ANSWERS
QUESTION: What can the local maritime industry do to offset
the poor ship repair situation?
Nesef: That is the $64 question. Obviously, first of all we
have to, as an industry, be as competitive as we can and that
has to do with facilities, it has to do with management, it has
to do with labor, it has to do with overall costs and work
practices.
And having got our house in order, we have to make
sure that our congressional delegation is well aware of what
the facts are, what we have done to warrant their attention,
and see that the Feds treat us fairly. And unfortunately, it
is a difficult phrase to define. There is a lot of work being
done by Dillingham, Northwest Marine, the Port of Portland,
certainly the Governor and his staff, and a variety of other
folks to work with the congressional delegation and make them
aware of the importance of this industry to our economic
well-being.
And I think, as Jim pointed out earlier, that may
not have been as well appreciated
in the past as
it is
currently. I don't know of any other particular actions,
obviously within that list there is a broad range of actions,
but that is really what we have to do.
QUESTION: The question dealt with Alaskan oil production and
its affect on ship repair work in Portland.
Nesef: The production, as I understand it, through Prudhoe Bay
as early as 85/86 could experience about a 15 percent decline
and it could come down fairly quickly for a couple of years and
then
level
off.
I haven't heard production levels as low as
you talked about. And I hope they don't occur. But the
continuation of the tanker market, on which we are very
dependent, depends itself on the discovery of additional oil in
Alaska and that oil moving rapidly to production and through
the pipeline.
And although the Prudhoe Bay field had 10
billion barrels of oil in it when they started, I think those
were the recoverable reserves. When you are pulling out 1.5,
1.6 million barrels a day, you can eat up billions pretty fast.
So we do face a decline and the number of tankers in the trade
is in direct relationship to the volume of oil and the distance
that they have to travel. On the other hand, there are some
bright aspects too. Nobody would be as foolish to forecast
what it is they are going to do with the natural gas that
exists in those fields up there, but from a price standpoint,
the least cost transportation system may very well be LNG
tankers.
When and if that is ever developed, and it will be,
that will be another opportunity area.
The only problem is
-21-
that these things have very lead times and I suppose
long
developing an oil field might take 5 to 8 years after you have
proven the field before you actually deliver the oil. So we
face a decline in the number of tankers that are available.
QUESTION: What is the status of the coal port at this time?
hlg set: According to the Daily Journal of Commerce this
morning, they are at an impass and that is as much as I know.
I am not part of those negotiations or really privy to their
status except that I understand that things are very close to
coming together. There are some sticky points but they are a
lot closer today than, say, 30 days ago.
QUESTION: The question dealt with the waterway user charges
proposed by the Reagan Administration.
Ngag.t:
The
Administration proposed the
imposition of
deep-draft user charges which would be segment specific. That
means that if you spend a million dollars a year dredging the
channel and you have a million tons of cargo, each ton of cargo
would be assessed at approximately $1.00. In other instances
where there was no dredging to access your channel, as is the
case in Seattle, there would be no segment specific user
charges.
Needless to say, the maritime interests of ports on
the Columbia River viewed this with some alarm. It would
certainly have a serious competitive impact on our commerce and
it was estimated that we would be talking in terms of 50 cents
a ton.
That may not be significant if it is a container load
of Sonys, but if it's a ton of
it could make a big
wheat,
difference. So the Port, in conjunction with most of the ports
in the Pacific Northwest, have been working with Congress and
various organizations to oppose segment specific user charges.
Today in Congress there are three or four bills which approach
this issue from various angles. least
is the
The one that
disruptive to the marketplace is most often referred to as the
Hatfield Bill.
The one that
is supported by the big ports and
has segment specific charges is the Moynihan Bill. Then there
is the free lunch for everybody Roe Bill, which approves all
the deep draft projects but doesn't charge anybody anything for
them. There may be a couple of others that I haven't been able
to identify.
Right now
it
looks to me as though the whole
situation is at an impass. Our delegation
in Congress has
absolutely done a fantastic Job in keeping us from getting
shafted.
I
don't think there
is a bigger task they have
tackled more successfully than that one.
ahlmarsl Latgc_in_iha liptihmkai
William SlAck, Business Representative
Electrical Worker's Union Local 48
I would like to talk a little about the way
labor
and
management is put together in this bargaining area up and down
the coast. I think we have a unique situation in the Pacific
Coast Shipbuilders Association and the Pacific Coast Metal
Trades Association in that we bargain from Vancouver, or the
Canadian border, to San Francisco as a group of labor people
and as a group of employers. By a group of labor people,
I
mean all crafts that work in the shipyard area: boilermakers,
electricians, machinists, steamfitters,
laborers, carpenters,
teamsters, etc. These folks all bargain as a group. They
don't independently as electricians, or as boilermakers, but as
a group under the auspices of the Pacific Coast Metal Trades
Association.
I think this has some advantages In that when
there Is a labor dispute, all of us are in it together, and
I
think that includes management.
Management also bargains, or has bargained in the past,
up and down the coast as a group of employers from the Seattle
area to the San Francisco area. In the last couple of sessions
a few employers have withdrawn from that bargaining session.
One
being Lockheed
in Seattle, and others that bargain
independently. But as a majority, they bargain as a group up
and down the coast. I think the excellent cooperation that we
have enjoyed in the Portland area as far as labor and
management getting along together has been mentioned. Outside
of times when we are bargaining about specific labor management
problems, I would say the cooperation in the Portland area has
been excellent.
The labor unions and management have been able to get
down to the nitty-gritty, the basic problems, and solve them
without causing work stoppages and added costs. I think that
is one of the reasons that all of the speakers have alluded to
the productivity in Portland. I think that is one of the
reasons we can perhaps demand a little higher wage than some of
our competitive ports, such as San Diego and other parts of the
U.S.
Just yesterday, I
had phone calls from the East Coast
asking for some specific qualifications in electrical workers
that they needed. Possibly we will be able to put four or five
people together to go back and help them perform the work that
they have to do. So we do have an excellent work force. It is
available and I think it is a direct spinoff from World War II
when, for instance, in my city of Vancouver, the population
doubled
in just a short period of time. Most of you in the
Portland area are aware that during World War II we were one of
the largest shipbuilding areas in the U.S. Our local union was
the largest electrical local in the U.S. during World War II.
-23--
There have been some changes since that time. Our membership
naturally has declined as the shipbuilding industry gave way to
the ship repair industry. But the expertise seems to remain.
These folks that worked during the World War II era and their
children are now available in the Portland area to do those
types of work that the shipbuilding industry demands.
I
think that cooperation between employer and unions is
the key to the success of Portland. I would have to say from
labor's standpoint, we view the employers in the Portland area
-- Northwest Marine, Dillingham and others -- as being some of
the finest employers that you could deal with. We have
excellent cooperation. We are able to resolve problems that
seem insurmountable for others up and down the coast. The
productivity in Portland,
is concerned, is
labor
as far as
unsurpassed anywhere in the United States and anywhere In
foreign ports.
We have a work force that is there, able,
willing, and anxious to perform the duties that are put before
them. They are excellent craftsmen. I think that is reflected
in the fact that those Jobs that come to the Port of Portland
for repair, especially naval type work, is out on time or ahead
I might argue a little
of time. We have a good track record.
bit about the availability and number of workers that are here
in the Portland area. I think I would say it is closer to
3-4,000 workers that are available here in the Portland area to
do ship repair work. These people, as I said before, come from
a spinoff of World War II and also from those Navy ships that
have visited our ports. don't know how many times I
I
interviewed a young person from other parts of this country who
liked the environment,
had visited our port as a Navy man, wanted to
live here and raise his family in Portland, Oregon,
and was an electrician on some naval vessel.
is a very important part of
The shipbuilding industry
Portland, Oregon.
I think it is something we have to keep
alive. One of the things I think labor and management could do
Jointly
is to work more closely in our political actions, our
lobbying efforts in Washington D.C.
and specific lobbying of
I have not seen a
our individual senators and representatives.
good coordinated effort between management and labor in that
area.
I think
labor can probably take a big part of that
blame. We are not educated perhaps as well as you in
management to address those issues politically, but we need to
learn and we need to work together to get that Job done.
These are difficult times for
labor unions. We are
having a tough time surviving under the Reagan Administration.
But I think labor unions are important when we need an
available work force and special expertise found among union
members. We see tough times ahead and if employment continues
the way it is, management and labor are going to have a hard
time surviving In the shipbuilding industry in Portland.
-24-
One of the things I think we need to understand in the
area of wages when comparing the private yards and the public
yards, is the fact that in the public yards most of the workers
work the year round. They are on a permanent salary; they are
guaranteed a Job. In the private yards that is not a fact.
Our workers will work perhaps a month and be off a month. I
think the average amount of time that an electrician, at least
out of our local union, would work -- I think I could very
safely say that if they got nine months a year that would be
excellent employment. For the last couple of years most of our
workers have worked less than six months. So they have to
support a family on a six month income. That is an important
consideration to think about when comparing private yards to
public yards.
I might mention in regards to the strike that we
have been on strike since the 26th of July. Lockheed in
Seattle is voting today on a contract proposal that we will
probably hear about sometime right after lunch and find out
what the vote outcome was. I think there is some headway being
made and I am hopeful that in the near future, this strike will
be over and we will all be back to business as usual.
QUESTIONS AND ANSWERS
QUESTION:
We are a little unclear, at least Dillingham is,
to
the relationship of some of the locals to the national
organization. The people here might have more sympathy with
the particular economic situation that we face that runs
counter perhaps to some national goals within various unions.
Is that a problem that you see?
Slack:
I think that in the Portland area we are pretty small
potato as far as the picture up and down the coast is
concerned. I am sure that the Seattle area, with employment of
some 4,000 electricians as compared to my local with less than
300, has a bigger influence on the negotiations than the
Portland area could. I think that international-wise there are
some differences in numbers of people in the different crafts
and that also has some influence.
QUESTION: Are you saying that the situation works to our
advantage or disadvantage then?
Slack: Well, that is a hard question to answer. I think the
advantage as I see in Portland over both San Francisco and
Seattle is the cooperation, the togetherness, that we feel at
least speaking from the union standpoint and I think I can feel
that from a company standpoint. The advantage I see is the
close cooperation we have as an industry.
TRANSPORTATION ON THE COLUMBIA RIVER
AND INNOVATIVE TRANSPORTATION IDEAS
Sam CA__5zue.5.5., Senator
State of Washington
Spokane, Washington
It is a pleasure for me to be here today and to talk to
you about the Columbia River. My first introduction to the
Columbia came 45 years ago last month, because it was on August
8,
1939, that I transferred from work on the Mississippi River
to do flood control work on the Columbia and Willamette Rivers.
My first assignment was to locate as many high water
marks of the 1880 and 1894 floods as possible. I spent an
extremely interesting four months on the task and I uncovered
one authentic mark for the 1880 flood and 21 authentic marks
for 1894. The intervening 45 years had erased most traces of
that flood, but then it had been 44 years since I did that work
and I still remember vividly my experience.
The Corps of Engineers set the levy grades based upon
the recovery of those high water marks, and we did a successful
Job with the exception of Vanport, where, because of the
limitation of funds, we chose not to rebuild the old railroad
grade which was being used as a levy.
Recently,
I
have been involved in research of another
kind, trying to develop alternative methods of transportation
of farm products. As the railroads abandon the small spur
lines that go to the country grain elevators, we will have to
develop alternative means of getting the grain to the main
lines or to the grain terminals. In some areas where grain
elevators are located on existing rail lines, there are not
highways. Our studies will develop the most economical means
of getting that grain to market.
In purusing the subject, I recently ran across a record
made back in the 1880/s. The story reported that Marcus
Whitman was the first recorded grower and shipper of wheat in
Washington State. Beginning in the 1840's,
the Walla Walla
mission,
established by Whitman, was the collection point for
grain and flour shipments to the mining camps reaching all the
way into British Columbia. As the mining boom subsided in the
1870's, the growers began to search for other markets. In an
effort to ship wheat to the East Coast, many innovative changes
were made. One enterprising rancher constructed a wood pipe
chute down the breaks of the Snake River. The length of his
chute was 3200 feet and it worked successfully for about 15
years.
It was far more economical to unsack the grain, pour It
into the chute, than to haul it by wagon the entire distance -26-
even though it meant resacking it arrived at the
it when
bottom. The success of that first wooden pipe chute attracted
others, but the competitor who chose to use metal pipe in a
shorter distance became a cropper. The one who accomplished
the task in 1500 feet found that by the time the wheat reached
the bottom, much of it was either scorched or pulverized. To
follow that wheat from the port on the Snake River, we found
that it was carried by shallow draft sternwheelers to Umatilla
where it was unloaded, put on a portage railroad around the
Falls, then to Celllo - again by shallow draft sternwheelers,
and then again portage and loaded onto a boat, taken to The
Dalles portage, and finally by boat to Portland. It was stated
that by the time the wheat left Portland, half of the value had
been consumed by transportation.
This last year, the Washington State Legislature looked
at a number of alternative forms of transportation. After a
considerable amount of debate, we passed four measures to guide
us in the next few years. Two of the measures were actually
additions to the transportation laws and two were resolutions
which were funded.
The first law was a Benefit Highway District Law.
The
idea for a Benefit Highway District law was not a new one. A
bill was introduced back
in
1957,
right after the passage of
the Federal Interstate Highway Act, then again in the early
70's to help meet the problems in Kitsap County caused by the
Trident program.
Neither bill
passed and so we
looked
critically at the measure when it was introduced in 1983.
After four major drafting sessions, the bill
was
accepted by both houses and is now law. It gives the counties
authority to float bonds, charge tolls to users, or tax
abutting property owners to get In the bonds. It is my
personal opinion that few, if any, counties will ever
use the
law.
The second measure was study resolution. The means we
in Washington State use to create this type of study is a floor.
resolution by the Transportation Committee, or any other
committee.
In this case,
I
asked the Transportation staff to
include in the work program a study of the sky shuttle. The
proposal for a cable system to reach from Bremerton, across
Puget Sound to downtown Seattle with a branch to the Jackson
International Airport was presented to us by a subsidiary of
United States Steel during the session. This type of shuttle
system exists in Europe and a number of cities and states in
America are looking at the concept. The suspended cars travel
on 32 drive wheels which ride on two 1-1/2" steel cables. The
cars carry 62 passengers and a ball park figure when a system
is constructed over land alone on existing roadway right-of-way
is about $1,000,000 per mile. It is usual to buy one car for
each
mile
in
the
system,
and
in the case of the
-27-
Bremerton-Seattle operation, the carrying capacity would be
approximately 3,000 commuters per hour. Travel time would be
12 minutes as opposed to the one-hour travel time now required.
The third measure was a law to provide for the formation
of a County Rail District. The basis of this law came out of a
workshop discussion I took part in last August at the Council
of State Government at Salt Lake City.
The idea was developed because of the continuing
pressure by the railroads as they abandon the branch lines
which serve the country elevator. There are some 1700 miles of
rail lines in Washington facing abandon.
We selected the county to serve as the local agency to
manage the program.
Two counties or more may enter into an
agreement to own and operate rail lines or other forms of
transportation
in light-density, essential-service areas. The
Rail District is empowered to
issue general obligation bonds,
receive state or federal grants and to charge tonnage fees to
support the operation.
Revenue bonds may also be issued.
(Chapter 303, Laws of 183).
The final measure is the most exciting measure to me.
It was a study resolution, adopted when we ran out of time to
pass the bill. It calls for a comprehensive review with
recommendations for a materials and products transfer system.
In 1982,
the Legislature purchased 217 miles of the
abondoned Milwaukee Railroad right-of-way. We believe that the
areas lying along this right-of-way will suffer unless some
means of moving grain is created. The Department of Natural
Resources was given the Job of managing the study, and on
September 15 a contract was awarded to Swann and Wooster of
Portland, Oregon. The main line of the Milwaukee may be the
major corridor with branch feeders, or branches could feed
large warehouse centers on the Burlington-Northern or the Union
Pacific lines, or grain terminals on the Snake or Columbia
rivers.
We will keep in close touch with the study as It
progresses and we look forward to an exciting report which is
to be presented to the Legislature in January 1984.
I will be happy to furnish a copy to any of you who
might request it.
UPDATE, COLUMBIA RIVER AND NORTHWEST
The U._1. Mariiimg AdminLaitAii.01
John. W. Pullsta, Maritime Development Representative
U. S. Maritime Administration, Portland
want to thank Gib Carter of the Oregon State
University Sea Grant Program and the other sponsors of this
conference for allowing me a few minutes to tell you about our
new Maritime Administration office in Portland.
I
Before I tell you about our Portland office functions, I
have to touch on the basic role of the Maritime Administration.
The agency's main function is to carry out the provisions of
the Merchant Marine Act of 1936, as amended. This has to do
with promoting and developing a competitive U.S. merchant fleet
to carry a reasonable share of our waterborne commerce and
serve as an auxiliary fleet in time of national emergency. The
bulk of the Maritime Administration employees who carry out
this basic role are
in
the Offices of Maritime Aids,
Shipbuilding and Ship Operations, Legal Counsel, and Research
and Development of MARAD in Washington D.C. The Maritime
Administration is in the Department of Transportation. We were
transferred over to DOT from the Department of Commerce a
couple of years ago. Although the Maritime Administration was
separated from the Federal Maritime Commission over 20 years
ago, many people still confuse the functions and the names of
the two agencies. The Federal Maritime Commission (FMC) is an
independent federal regulatory agency and its functions deal
with such things as tariffs and agreements concerning ocean
carriers, and ports and matters of regulating ocean commerce.
On the other hand, the Maritime Administration is a promotional
agency and not a regulatory one. When I moved into the Federal
Building at 1220 S.W. 3rd Avenue on May 31, the first thing I
found was that the General Services Administration had labeled
my mail box "Federal Maritime Commission." I
have had phone
calls from individuals thinking I represent the FMC.
In addition to the basic shipping role of MARAD, the
agency is also in the business of promoting ports, domestic
shipping, and marketing support for U.S. flag carriers. These
are the programs that the Portland office will be involved in.
These programs have only a small amount of staff and funding
resources compared to MARAD's major ship related programs. The
responsibility of the Portland office will be to supplement the
efforts of the maritime industry in Oregon and on the
Columbia/Snake Rivers by providing Information and research and
acting as liaison between the industry and other agencies where
we may have an interest.
-29-
MARAD does conduct a lot of studies, both by staff and
outside contractors. We compile maritime data statistics. We
perform any demonstration projects with the industry. We make
available, either free or at a small cost, all the reports we
publish. These are listed
in a MARAD catalog published every
year.
Besides providing
community
with
maritime
the
information on hand, we welcome industry-sponsored, well
thought out proposals to perform studies or demonstration
projects that will contribute to the betterment of a maritime
region. We have no grant program to do this for the industry,
but where there is a serious and genuine interest by a segment
of the industry to provide some of their own resources, we will
cost-share a project, provided that it is also in our own
interest to do so. We write no blank checks.
To best
illustrate our capabilities and the maritime
community support for our research projects, I would like to
point out some examples of projects we have been involved in:
-
The Oregon Port Planning study that was done a few years
ago in conjunction with the State of Oregon.
-
The Washington Public Ports Systems studies that were
done in conjunction with the Washington Public Ports
Association in 1975 and updated in 1980.
-
In 1981,
the Maritime Administration, the Port of
Oakland, and
the
Maritime
Terminals
Corporation
developed and demonstrated a computer application
program called a Marine Terminal Automated Management
System (MTAMS) for control of cargo and equipment at
public container terminals. Since then, the Ports of
Portland and Tacoma have acquired the baseline computer
software tapes and are presently implementing their own
systems. Terminal 6 here In Portland is about on line.
Both Ports have told us that our initial research did
save them time and money in developing their systems.
We are happy that this MARAD R and D effort paid off for
the industry.
-
Another popular project that has interested the large
ports is MARAD I s joint effort with the City of Tacoma
Fire Department to evaluate the capabilities of a
multi-purpose hover craft. This hover craft is the
first of
its kind
in the country. The benefits of
operating this type of vessel include low operating
costs and fast response time in combating fires and oil
spills, and in search and rescue. Ports such as Long
Beach, Los Angeles, and San Francisco have shown an
interest because in some cases their fire boat expenses
run $1 million a year.
-30-
-
In-Port
Another project was our nationwide Vessel
Locator System called "V.IPLOC." This was another
demonstration project but with the San Francisco Marine
Exchange.
-
Our regional Port Impact Model that was cost-shared with
the Port Authority of New York/New Jersey is being
This
adopted by the Ports of Seattle and Long Beach.
project
is suitable primarily for the large port with
ample resources. The model is designed as a flexible,
self-contained analytical planning tool to enable a port
to prepare a regional economic impact assessment and to
undertake "what if" policy simulations based on changes
in port activities or its economic environment.
-
A recap of one of our recent in-house studies was
published in the August issue of World EoLts magazine.
This study quantified the economic importance of the
U.S. stevedoring-marine terminal industry. It was
produced by MARAD and the National Association of
Stevedores. This report will be helpful to people who
are not fully acquainted with the stevedoring industry.
Now, let me turn to the future!
be
First, we will
revising our port economic impact kit by simplifying its
methodology and adapting various sections to standard software
programs. The kit is for small and medium-sized ports with
limited resources and personnel to make port economic impact
assessments. Ports such as Longview and Fraser River, Canada,
used our old kit with good results. Secondly, we will be
developing a Eort_
Rtak MARAgg Mflai Maniuti in conjunction with
the Pacific Coast Association of Port Authorities and the
American Association of Port Authorities. This effort will
be
useful for port employees handling insurance matters. Briefly,
it will
be a guide book for solving common risk management
problems and will provide a reference on port risk management
techniques. And lastly, we will be promoting the use of our
ship simulator located at our Kings Point, New York, Research
Center. This computer-aided simulator has been used by the
California Coastal Commission for ship traffic
in the Santa
Barbara Channel
in Southern California and also for dredging
projects at the Ports of Mobile and Norfolk.
In conclusion, we do believe that we have some resources
to assist the maritime industry here in Oregon. We depend on
you to make us aware of problems, issues and projects you think
should be addressed jointly by MARAD and the industry. We
stand ready to work with you and the maritime associations that
represent you.
You have MARAD representation in Portland now
and it is up to you to use our resources.
-31-
Propolel_Liner_QpneoLtium
Ratans' LDLneliks, Vice President and General Manager
International Shipping Co., Inc.
I have been asked to say a few words in connection with
what is known as the proposed liner consortium. I will try to
provide for you today some background on the agreements that
have dated back to the 60's and a few comments as to how the
agreement might affect the Pacific Northwest and the Portland
regional market right here at home.
This August 19, the Federal Maritime Commission granted
interim approval of space charter agreements for the Six Line
Japanese Consortium on the condition that the lines
limit
actual
capacities
in the service
in addition to the usual
limits on the amount of space which could be cross chartered
among the
lines.
This particular
interim agreement
is
technically good for 60 days and, therefore, runs out at the
end of October.
If it Is not approved, or not agreed to, by
the six line consortium, the request by that group for an
extension of five years will go down the drain. I don't think
that will happen, but that is where we are at this point.
The Japanese Six,
or Big Six,
are lines that Jointly
deploy a vast fleet of container vessels between Japan and the
U.S.
They are operated by the lines on three services to the
U.S. West Coast and the East Coast.
When containerization
started in earnest in the transpacific trades in the latter
part of the 1960's, the Japanese lines formed various space
charter consortia which have since
led
to a host of
confrontations with both the FMC and the U.S. carriers. The
first service to be containerized was the Pacific Southwest
operation to California in 1967. Today, we have a grouping of
four and two into California. That is, NYK and Showa together
and the four
include the balance of that group, Mitsui, YS,
K-Line and Japan Line. The Pacific Northwest service was the
next to be launched when apparently a wiser group of all six
came under one umbrella, through a single space charter
agreement versus the two that I mentioned in California.
Following that, the so-called New York service was then formed
with five lines in one consortium with the exception being
Showa Line. There are five then to the East Coast.
On each space charter service, the U.S. anti-trust laws
required that the Joint space charter agreements be approved by
the Federal Maritime Commission. Apart from the odd rate war
and periodic overtonnaging problems, the Japanese consortia
were not hampered in their growth in these trades, nor were
there any FMC approval complications except the usual delays
-32-
It
during the latter part of the 1960's and into the 1970's.
was not until
1980 that things began to go wrong to some
degree, especially on the highly competitive Pacific Southwest
for the
service to California. During August 1980, approval
three space charter agreements expired and the lines applied
for renewal in June of that year. The usual protracted
hearings then began and the FMC issued an interim authority at
that time to cover the space charter agreements for a limited
period while the proceedings continued for the overall and
final approval.
The main argument for renewal was that unless their
space charter consortia existed, overtonnaging and conjestion
at port facilities would result. Finally on January 16, 1981,
the FMC approved the operation of joint service on all three of
the routes to this country with the implementation backdated to
August 1980 and running to August 22, 1983. However, for the
first
time, this approval
upon the TEU
was conditional
limitations within each space charter consortium. These limits
So the
were set for the space charter agreements only. carriers could take more than the given figure if it was
carried outside the charter terms by the vessel owner and not
interchanged between the partners. The first problem following
this approval was that several U.S. carriers immediately
objected on the basis that space charters were not competitive
and they claimed that the FMC did not approve them properly.
The space charter service of the Japanese lines has
greatly benefited the Portland area shippers and the Port of
Portland.
It has afforded a needed high level of service to
Japan, which accounts for 52 percent of Oregon's trade. The
six lines, through their space charter agreements have provided
the service every five days for the last ten years. No other
carrier, U.S. flag or third flag, can provide service even
approaching the consistency or duration of the Japanese lines.
The six line space charter agreement has allowed the port to
accommodate this high level of service with a minimum level of
public investment in terminal facilities. It has also enabled
the Port to achieve a high level of facility utilization at
Terminal 6. To handle the same level of service by separate
lines would require additional and
berthing space, cranes,
backup area at additional public cost.
The Japanese space charter service and the FMC's
decision to limit actual vessel capacities hinge on the central
issue of overtonnaging, or excess vessel capacity. The fact is
that the four space charter agreements cover three trade routes
- that is, the East Coast, California, and the Pacific
Northwest, with three different overtonnaging or tonnaging
conditions involved in those trades. Yet the FMC has, as of
last month,
applied
a single solution in all cases, based on
information applicable at the time they received that data to
the California trade alone. While the Japanese
line space
-33-
utilitzation
in California is low, about 68 percent eastbound
and 56 percent westbound,
the
Pacific Northwest trade
utilization rate is virtually 100 percent. In Portland, the
Japanese lines have consistently been booked full over the
years and average about 700 TEU's per sailing from Portland.
This situation has persisted for the last five years and it
seems evident that Portland shippers can use added space for
the Japanese lines and that the addition of new capacity would
be readily
absorbed
by
the
Portland
market
without
overtonnaging.
The Portland Far East container market is, therefore,
undertonnaged and not overtonnaged. There is simply not enough
vessel capacity serving Portland to carry all the available
cargo. Conversely, the Seattle market is virtually
overtonnaged; there is not enough cargo for all the ships.
This point is illustrated by two facts. First, substantial
amounts of cargo must be trucked from Oregon to Seattle to find
the needed vessel space. Second, there is about three times
more local and regional cargo for vessel calls available in the
Portland market compared to Seattle. Over 200,000 tons, metric
tons, of Oregon cargo moved via Seattle container lines in
1982. With ocean carriers serving Portland during that period
of time fully booked. This clearly indicates that Portland is
undertonnaged and in need of additional vessel capacity. The
amount of leakage to Seattle constitutes about 25 percent of
the Portland Far East cargo market.
In Portland we are served by only 144 Far East container
sailings per year, of which the Japanese space charter is one
half.
The approximately 950 thousand revenue tons of Portland
cargo market represents 6600 tons per sailing of cargo
potential. By contrast Seattle is served by 500 sailings - as
compared to our 144 per year - and on their local regional
market for the Far East cargo Is about 1,090,000 tons, a little
more than 100,000 tons additional, with intermodal cargoes
excluded from those numbers. The Seattle cargo base represents
only about 2200 tons per sailing. That compares with the
Portland figure of 6600 tons. Again it is clear that the
Portland market is apparently undertonnaged.
This is further demonstrated by the fact that new
carriers have begun Portland service
In
1983
without
diminishing cargo on existing lines. While three new lines
have doubled the number of sailings from Portland since May
1982, tonnage on the Japanese lines has remained steady and
slightly increased. These new lines have done well In Portland
because of the need for more shipping capacity. As a result,
Portland's Far East container tonnage is up 67 percent. In
spite of new steamship lines serving Portland, Ile Japanese
utilization rate is still almo_,t 100 percent and the lines must
frequently turn down bookin j s.
Added capacity is therefore
needed. The FMC's
conclusion that the Japanese vessel
-34-
capacities
should be limited to avoid overtonnaging is clearly
not justifiable in the Northwest, and particularly not in the
Portland market.
The FMC decision also raises a fundamental
legal
question.
Until
now the FMC has exercised the rightful
authority to limit the amount of spa.oe which the lines may
cross-charter. Vessel capacity above and beyond the
cross-chartered space is only used by the vessel owner. The
FMC has not had authority to limit the vessel capacity which an
individual owner may operate.
In
its decision last month,
however, the FMC places actual vessel capacity limits on the
six lines, thus limiting the capacity of individual lines. It
seems highly questionable as to whether the FMC has the
authority to do this.
The central issue in the FMC's decision is,
of course,
overtonnaging. In concluding that the four space charter
agreements, that is two in California, one In the Northwest and
one on the East Coast, as they are presently structured may not
be performing their basic function of preventing overtonnaging,
the FMC has failed to recognize the regional differences in the
trade conditions.
We think then, at the very least, the Northwest Space
Charter Service Agreement No. 835 should be exempted from
vessel capacity limitations. The TOKYO MARU, which began
Portland service September 12, and the SHINBASHU MARU due in
January 1984 and other Northwest replacement vessels should be
allowed to enter the trade at full operating capacity.
.ap ikataa_Elig r
Clig f_Qms OilirIct
Stev g Ng wman, President
Columbia River Customs Brokers and
Freight Forwarders Association
There are really two parts to our present difficulty
with the Customs Service In the river. The first Is a fairly
new customs plan which would establish a small number of
regional appraisement centers around the United States. All of
the commodity specialists now located in the various port areas
would be centralized into these locations. To my knowledge,
there is no support for this program from any importer groups
or any brokerage groups. But the second and the more damaging
proposal
would
reduce
the number of customs districts
nationally from 47 to 35. The ports losing their district
-35-
status would become sub-ports of their larger neighbors.
This is not a new program. We last successfully fought
the battle to preserve our district in the mid 1960's. During
the last year, however, Customs headquarters in Washington has
begun an aggressive campaign to institute their plan. The
districts closest to us that have already been abolished are
Great Falls and San Diego.
Why is the district status important to us? in the
customs scheme of things, the country is divided into seven
regions, and each region into several districts. Our regional
headquarters is Los Angeles and we along with Anchorage,
Seattle, San Francisco, Los Angeles, Nogales and Honolulu are
the district offices. Within each district are any number of
sub-ports reporting to that district. Each district has its
own director and staff with wide discretion to act upon matters
such as penalty cases, classification decisions,
manpower
allocations and soon. The sub-ports do not. Should we lose
our district status, we would lose not only our district
director and his assistants, but also most of our commodity
specialists, our fines and penalties officer, and our marine
officer. Decisions which are now handled on a local basis
would be referred to the new district headquarters, presumably
in Seattle. As a sub-port, we would have the same status as
the ports of Aberdeen, Great Falls and Nighthawk.
We oppose the efforts to take our district away from us
on two grounds. The first is that Oregon, Southwest Washington
and Idaho, the whole Columbia/Snake River system, is really a
distinct trading area. We have our own cargo mix, our own
problems, and we are in no way tributary to the Puget Sound.
The second, we are in size of customs collections, the 17th
largest district in the U.S. And we had the second largest
increase in collections in 1980-81, second only to Houston. We
are the largest district in the country scheduled to be
abolished. The next
largest district which was abolished had
collections of $42 million
in
fiscal
1982.
The Portland
District had collections in
fiscal
1982 of more than $154
million. In short, we are a viable growing trade area and in
order to maintain and foster that growth, we must have a full
range of federal services necessary to support us.
Now what are we doing about it and where do we stand?
Last year, prior to congressional action on the appropriations
for Treasury, of which Customs Is a part, Congressman Wyden and
Senator Hatfield introduced amendments that forbade Treasury to
use any of the money appropriated to change in any way, the
status of the Portland District. Districts that were
unprotected by legislation were almost immediately abolished,
like San Diego. We have it on very good authority that customs
is as anxious as ever to abolish this district and our feeling
is that we will once again need congressional action to avoid
-36-
It. Last week in Washington we received the personal
assurances of both Representative Wyden and Senator Packwood
that amendments similar to last year's will be attached to
either the Treasury Appropriations Bill, or more likely, given
the speed at which Congress
is now working, the continuing
resolution that will provide funds to Treasury for fiscal 1984.
Every member of the congressional delegation as well as
Congressman Bonker from Washington's 3rd district have offered
their support of these amendments. Given the fact that Senator
Hatfield is Chairman of the Senate Appropriations Committee and
Senator Packwood is Chairman of the Senate Commerce Committee,
I don't think that we will fail this year. However, we have to
show popular support and we ask that each of you write to your
senators and your congressmen expressing your support for the
maintenance of the district. Congressmen do, in fact, pay
attention to what they hear from their constituents. Ron Wyden
made a comment to a Town Hall meeting that the most mail he had
received on any single issue since being in Congress was on
this issue last year. And he has become very interested and
very supportive. So we ask that you take the few minutes
necessary to get a letter off and ask that they do in fact
support us.
In an effort to find a long term solution to the
problem, an ad hoc committee has been formed with
representatives from all the ports, importers and brokers. The
committee is chaired by Tom Zelenka of the Port of Portland.
If any of you have any ideas for a long term solution, we would
be delighted to hear them. Please send them to either me or
Tom Zelenka in care of the Port of Portland.
Again, the continued growth of our area as a center for
International
trade depends to a large extent upon the
continuation of these federal support services and we believe
that a full service Customs District is vital to us.
The Ep rI Di Egrilansl_Ixg.n±y__Ykor Master_Elian
Margery_Akixott, Senior Planner
Port of Portland
I think 1 was invited here today as a challenge to see
if my Master Plan has been sitting on the shelf for the last
two years. It has been about two years now since we did finish
the Master Plan. As all of you have been aware, these have
been a rough two years, both for the Portland economy and the
-37-
maritime
industry.
It certainly is a real challenge to see if
a plan is flexible enough to meet these kinds of downturns and
still keep an eye on the long term requirements to keep the
Port competitive. One thing I do to keep a little perspective
on this whole issue is I have a chart on the wall of my office
that shows Port of Portland cargoes for the last 30 or 40
years. It really looks like a mountain range, it's Just up and
down and up and down. But it is tilted. The long term growth
trend has been very consistent over this time frame.
Before i try to bring you up to date on events relating
to the Master Plan, I want to briefly review the Master Plan
just to set the stage. The Master Plan and the task force that
we had working with it looked at the potential growth of cargo
over the next 20 years at the Port of Portland. The plan
identified actions in terms of land and facility development
the Port would have to take in order to remain competitive in
the long run and also set policies to guide this development.
We identified potential for cargo growth from about 7.1 million
tons of cargo in 1980 to as much as 23 million tons by the year
2000.
If we are going to have that kind of cargo volume we
need to build basically one new dock, one new berth a year, to
keep
up.
Also this means
about $300 million worth of
facilities when you look at 1980 dollars. It also means we
need to reconstruct existing facilities as the Port begins to
face land constraints.
In specific terms, the 30 member citizen task force
recommended several things.
The first was the land use plan
which we are following in terms of development and new
facilities.
Second was a policy statement which emphasized the
need to provide 1-he region with regular steamship service for
general
cargo of
all
varieties.
It also made a policy
statement recognizing the need to attract more special purpose
facilities such as coal and auto
facilities
which
bring
in
revenue to the Port. One thing that the Master Plan did point
out was the need to look at public financing in long terms. I
think we identified that 20 percent of the facility
requirements over the next 20 years would require some kind of
public financing. The task force also recommended that we seek
a general
obligation bond to finance reconstruction of the
older general cargo terminals to keep them viable
in this
market. That is where we were two years ago.
Now where are we today? In terms of tonnage after two
years of decline, we seem to be well on our way to an upswing
in most areas.
This fiscal year we have seen a 25% increase in
general cargo volume. Terminal 1 is still down;
it
is
down
about 15 percent this year. Our Terminal 2 volume is up about
49 percent over 1981-82 and Terminal 6 us up 33 percent
overall.
We had an excellent year in dry bulk exports and the
auto business was up despite the voluntary restrictions of the
Japanese.
Steel imports still remain low and probably will not
-38-
recover until the economy recovers some more. I am sure you
are aware of the changes in the steamship lines; some of them
have already been referred to today. While we have lost a few,
we have brought in several major new ones, like Hyundai Line,
Mitsui Korea, Taiwan Hong Kong Service, Westwood, PAD has come
in the last few years and
is now
increasing their service,
Pacific Alaska and a couple of others. This is right in line
with our general cargo mission. In terms of facility
development, progress in some areas has been a little bit more
rapid than we anticipated and in a couple of cases it has been
a bit rougher than we had hoped. But all of the facilities are
following the direction that the Master Plan outlined.
The most significant projects are as follows:
The
Columbia Grain Terminal at Terminal 5 has been expanded. There
is construction now underway at Terminal 4 to add an
interim
RO/RO berth so that we can serve RO/RO ships until Terminal 2
is rebuilt.
Also it will be very important during construction
when we tear up the old one. The third
item is the
construction of a coal facility
on 100 acres
in South
Rivergate. As I think most of you are aware, it was about
80-90 percent complete when construction stopped. That stopped
on about March 2 of this past year. In the most recent
development,
the Port has accepted
it
in principle.
understand the details are being worked out and the people at
the Port are pretty optimistic that it can be settled before it
comes back up in court. The revisions will be to the lease.
I
think the changes are possible minimum guarantees that will
allow the project to proceed. And finally, the most visible
recommendation of the Master Plan is reconstruction of Terminal
2.
In April
1982,
the Port Commission approved a ballot
measure to seek a general obligation bond for reconstruction of
Terminal 2 and some repairs for Terminal 1. This would have
been on the November 1982 ballot. This project go waylaid by
Proposition 3, the property tax limitation measure. This was
on the recommendation of the Attorney General, who felt that
even if our bond measure were to pass, we probably still
couldn't get the money if Proposition 3 also passed. And at
that time Proposition 3 was ahead by 60 to 70 percent at the
polls and it just didn't look too promising. So in August of
last year, the Port Commission pulled the bond measure off the
ballot until the whole property tax issue could be straightened
out, either through the election or the State Legislature.
Right now we are actively reevaluating the bond measure and
seeing how we can proceed. We are feeling very strongly about
the need for the T-2 reconstruction. We just have a lot of
cargo we have got to handle somehow and that is the best way we
can do it. The need for a T-1 is not quite so clear right now.
In summary, given the fluctuating nature of the marine
business, the Master Plan continues to serve as the target and
also as a way to assess where we are. The projects identified
in the Master Plan are proceeding and being built as we said
-39-
they should be, based on market demand in terms of funding
availability.
Projects such as the new multi-purpose bulk
facility continue to be a high priority. We are looking for
funding sources there. We are also looking for the further
expansion of the T-6 container docks before too many years
pass. The most pressing issue before the Port right now is the
one
of financing major expansion with the very limited
resources available.
This problem was first identified in the
Master Plan, but it has really grown as competition among the
West Coast ports has stiffened. We don't see any changes in
the near future.
The
Yksskl In=agri.
1.31g biQL 5y5±gM
Dick_LafleiAnLf, Executive Director
Portland Merchants Exchange
What I am supposed to do is give you an update on
VIPLOC.
I don't Imagine anybody in the room knows what VIPLOC
is.
So bear with me for just a few minutes and I will give you
a
little bit of history about VIPLOC or Vessel In-Port Locator
System.
Several years ago the San Francisco region received the
first two R and D contracts from MARAD to do a study of all the
major ports in the U.S. to establish, among other things, if
there was a market or a need for estimated time of arrival for
vessels in all the ports of the U.S. and the actual vessels
that would be in port. As a result of that study, there was a
meeting in San Francisco in 1980 where the National Association
of Marine Exchanges was formed. That was the first time in the
last 20 years that all the marine exchanges in the U.S. met
together. They had actually never met at one time. The
Columbia Association went back to MARAD along with the San
Francisco Exchange in late 1981 for an R and D contract to
actually write the software and develop the system. The system
has been working in San Francisco and is totally computerized
as far as keeping track of its vessels. Their billing is done
on the computer. The software disks are supposed to be In the
mail so we are hoping that we
in Portland will be able to put
them on our micro-computer and keep track of the vessels the
same way.
To extend that beyond the local marine exchange, for the
last two years we have been meeting with various vendors to
find someone who could set up a national data base and also
handle national marketing. After the original study and some
-40-
smaller studies, it was
felt there was, in fact, a national
market for this information. This includes local people such
as attorneys, ship chandlers, agents, owners, stevedores, port
authorities, brokers, and freight forwarders. They are pretty
obvious customers most of the marine exchanges already have.
Then there is the array of federal agencies.
Remember, there is no public or private agency at this
time that can give you a list of vessels in port.
Just to give
you some
idea of the kind of information we will be fitting
into the system when it goes on line: the name of the vessel,
the ID number, the type of propulsion, flag, type of carrier,
such as container, breakbulk, grain, etc., last port of call,
next port of call, local
agent, local berth, estimated time of
arrival, estimated time of departure, and some local
things,
such as pilots, and tug company. Based on this information, we
hope
that the vendor that we selected, which is Trade
Information Planning Specialists in Seattle, will put together
an array of reports that the customers will be able to get by
contacting the local marine exchange or the larger customers
can put in their own CRT's and be able to call up any selection
of these different reports.
Just to give you an
idea of the ports that would be
involved in the system. They would be New York, Baltimore,
Hampton
Roads,
Houston,
New Orleans, Los Angeles, San
Francisco, Portland and Seattle. The intent is for those ports
to pick up the small ports
in their area. The best estimate
that we have been able to come up with is that these ports and
the small
ports near them would represent something like 90
percent of the arrivals and departures. And it is the hope
that as it goes on line, we will be able to pick up some
additional ports by contacting the pilots associations or
starting additional marine exchanges to cover those areas. In
June of this year, I attended an international port and harbors
meeting in Vancouver, B.C. where I heard the various European
Common Market countries present papers on a project similar to
the one I have described here. They have completed their study
and established a need and now they are thinking in terms of
software, this type of thing. So they are probably two to
three years behind where the U.S. effort is right now. Our
next meeting of the National Association is
in October in
Virginia, at which time I hope we will sign the final contract
with our vendor in Seattle. He indicates that it would be
about six months from the time we sign that contract before we
have the national system on line.
PANEL: OCEAN CARRIERS--CONFERENCE VS. NON-CONFERENCE
ELQ:LCDpitrtncty
Liam
Ricjiagi UrkmDyill ,
Vice-President - Marketing
American President Lines, Ltd., Oakland, California
I was asked to spend Just a second describing what a
common carrier shipping conference Is. These are groups of
carriers who get together in our country, under the auspices of
the Shipping
Act
of
1916
and subsequent
legislation,
essentially to set prices, rules and regulations in a given
trade. These conferences have been around In all International
trades essentially since the late 1800's. The first conference
went to, depending on how you want to define it, about
1850-1860 between England and India. And they developed in ail
the trades at that time. Around the turn of the century there
was a real question in a variety of governments' minds whether
essentially price fixing cartels, which is what a conference is
to a large extent, was appropriate for this kind of business.
And several governments initiated large studies to look at that
issue, our own being one.
The result of our look at the business was the Shipping
Act of
1916,
which establishes a series
of
procedural
safeguards for the shipper. Other countries, the United
Kingdom being one, went the other way and decided that the
conference system was so appropriate that they made it an
integral part of the regulations of the business. Even today,
In different trades, if you are not in the conference you are
not in the business. Many of us I think would prefer to see,
at
least intellectually, free and open competition everywhere
in the world. But fortunately or not, it really doesn't work
that way. What really happens is that foreign governments and
our own government to some degree have a variety of interests
in the various players in the international shipping community.
The conference is one of the institutions and one of the
forms through which the competing government interests directly
contact the carriers. It is a way for a government to help
balance the supply-demand equation among the carriers in the
business.
It
is clearly a way for the carriers to protect
their own
interests.
Conference carriers are generally
characterized, without speaking about any particular carrier or
situation, by higher service level kinds of carriers. They
operate the more complex systems, focus on the higher value,
and more management intensive pieces of business.
If you study the trade statistics in the U.S., you will
find there Is a clear distinction between the kinds of business
-42-
typically carried by conference carriers and the business
typically carried by non-conference carriers. It seems to me,
and it seems to my company, that that is only correct. Buyers
in the transportation market buy different things. Some buy
the lowest cost, some buy a different service package than
others, some buy fast transit time, some buy different kinds of
documentation. Some buy
intermodal
service, some don't. If
you are buying direct port-to-port service, rather simply, and
you happen to be positioned, let's say,
in Hong Kong and
shipping to the U.S.,
non-conference competition is real
competition and is a real problem choice for you as a shipper.
In other situations that is not the case. As one of the
speakers said earlier, there is really no black and white in
this situation any more than any other. Because if conferences
were all bad or all good, we would either have all the business
or none of the business and it Just doesn't split that way. It
splits up because people buy different things.
Now from a carrier's perspective, why do we want a
conference? Well, the normally stated reasons are stability of
rate and supply, which is the classic kind of reason. Now
there is an offset to that. Stability of rates and supplies
implies that at any given commodity you might be able to buy
cheaper elsewhere. So If the counter argument is "Yes, but
those stable rates are higher than they would be without them,"
in some situations that is absolutely true. But try buying a
discount airplane ticket around Christmas; you have those kinds
of pricing differentials.
As I mentioned, it provides a form through which certain
other interested parties in the trading community can meet and
talk and exert their influences. In most countries, ours being
a notable exception, shippers and shipper's councils are the
analog on the shipper side to the freight conference on the
carrier side. They seem to work reasonably effectively in most
countries. Not all, but in most. They don't in ours because
they are not permitted. The argument that it is more difficult
here in the U.S. doesn't hold too much water because that is
more a problem of the existence and non-existence of the
shipper's council than it is the existence of the ocean freight
conference, at least in our judgment.
The third and most damaging criticism to the conference
system per se is that it tends to be less flexible and less
responsive to individual shipper needs than Just an individual
carrier. We have a situation here on the West Coast with which
we are all familiar. The PWC, Pacific Westbound Conference, is
having extreme difficulty at the moment being market responsive
and being flexible enough to react to the needs of the
marketplace. We are meeting in Singapore today, as a matter of
fact, to resolve those issues. And we, as a company, support
the continuation of the conference system, but it must be
responsive to marketplace needs. If something doesn't happen
-43-
In the conference structure, particularly westbound from here,
American President Lines is clearly going to have to look at
other options.
There are historic reasons why the PWC has
these problems. I won't dwell on them at length, but it is
essentially a matter of the change in the transportation
community, most notably containerization and intermodal have
gone past the conference systems' ability to quickly handle
them.
That is not a problem eastbound where carriers can act
independently within their conference environment, but remains
a problem in most of the westbound situations. So we think
that the responsiveness and flexibility criticism is the one at
the moment that has the greatest merit.
We don't believe that the rate argument has much merit.
The argument that conferences keep rates artificially high I
don't think is demonstrated by any of the evidence - at least
none that we have seen. Requests for rate reductions, for
example in the PWC, particularly over the last year, have been
approved in the 85-90 percent range, not all but most.
Conferences have historically, and we think will continue to
have, market niches and market segments that they are better
equipped to address than non-conference carriers.
Clearly
there is some overlap, and one keeps the other honest If you
will, but the segmentation process does go on in this business
and they are separate.
And finally, foreign governments. This is an argument
that we may or may not agree with, but I submit to you as a
fact of life: foreign governments take a much greater interest
in their trade and their merchant marines than we do. They
legislate and through their own legislation and their own
maritime reservation laws and the developing UNCTAD Code, use
the conference as the mechanism through which most of these
governments act. And so to wish them away because you think
the prices are artifical Just doesn't speak to the reality of
the way foreign governments will continue to act in our
Judgment.
Again, we as a company support the conference system
because we believe it does provide the stability, does permit
the segmentation of the marketplace that makes immanent sense
to us.
It is a forum for people. We support shipper's
councils in the U.S., clearly our government does not, and we
find conferences as a very strong and natural part of the
transportation community as such organizations have been in
airlines and motor carriers and numbers of other kinds of
situations.
s/nr.pniortuic_e_Yiem
Erik Laikenketa, Vice President - Trans Pacific
Westood Shipping Line, Tacoma, Washington
In many cases you find that the conference carriers
really represent a mixed bag because they are conference in
some cases and they are non-conference in others. So they do,
in many cases, speak with two different tongues and that is why
I find this pro-conference set-up here quite interesting.
Westwood Shipping is a relatively new operator as a
shipping entity. We are one of the few operators that are 100
percent independent. We are not a member of any conference In
any of the trade routes that we do operate.
And before I go into the arguments pro and con the
conference, I want to touch on some considerations that the
carrier has to go through before deciding to be a conference or
an
independent carrier.
And there are a lot of issues. We
have the problem of the national flag versus a third flag
carrier. The third flag carrier issue is a very important one
because as a cross trader you would have to fight the national
flag at both ends. We do see a lot of favoritism for the
national flag. Governments do favor their own flag regardless
of cost. We have cases here in the United States of the PL-480
program where at the expense of the U.S. taxpayers, a lot of
cargo is shipped primarily on
U.S.
flag.
It was said earlier
by a representative from MARAD that they wanted to strengthen
the U.S.
flag and help them be more competitive. I think in
many cases MARAD is not doing that.
In fact, at the cost of
the U.S. taxpayer, it is making them less competitive by not
letting a lot of cargo go out on open bid market. In other
cases the government gets involved with companies like Chrysler
with government loans. The negative factor is that Chrysler
then has to support U.S. flag only, at the high cost as
compared to a lot of other alternatives.
So it is a complicated issue for a carrier to decide.
You have to review the flag, you have to review the trade
routes, and you also have to review the type of trade you are
going into because each trade is different. What type of ships
do you deal with?
Do you deal with 100 percent cellular
container ships, are you a combination carrier, a breakbulk
container, or a con-bulker. All of these factors are very
important for a carrier when they make the decision. In a case
of Westwood, we are what I would term a con-bucker operator.
The types of ships we deal with are bulk ships and combination
container ships. So the mix of cargo we deal with
lends
itself,
in our view, to be an independent operator in both
directions. The carrier has to make a lot of decisions and
-45-
obviously when he finally makes the decision,
he starts off
with his own good "where do I fit in?" Then he makes the
decision of conference or non-conference. And each owner again
has a lot of different sets of circumstances and scenarios that
you have to take into account before that decision is made.
From the shippers point of view, you have the cost
aspect, the reliability of service and schedules, the port
range that is being offered, and the attentiveness to shippers
needs. One important factor which is very often overlooked and
is often misunderstood in the trade Is that it's not an
either-or case. The shipper can use conference and outside
carriers In most cases. Conference carriers try to indicate
that in most cases you either ship with us or you don't ship
with us because we can take certain actions. In most cases
that is not correct. And that is a big issue as an independent
carrier trying to bring this message across to the trade, to
tell the trade that they have options.
They can ship both
conference and non-conference most
in
cases
with
no
repercussions for their own activity, which gives them the
benefit of both worlds.
I
think it is also very important for
the shippers and the consignees to sort out the bad apple from
the good apples among independent carriers.- Because in the
very volatile shipping markets, there are cases where smart
independent operators might go out and take advantage of the
low shipping market and take time-charter ships into the trade
for a year or two and then disappear from the trade. I think
it is wise from the shippers' point of view, when they look at
their selection of conference carriers, to look very closely at
the independent operators who they support before they really
go into any type of business relationship. I think that is
extremely important.
Attentiveness to shippers' needs is extremely important
also because the conferences,
in most cases, have very slow
decision-making processes. I
don't know how many shippers we
have in the room here, we have some. I would venture to guess
that in most cases you have received a request coming back from
the conference and your requests have been C.O.D. so you will
hear from us in two or three weeks or whatever. That is Just
not a good way of doing business. The other point, which
is
also extremely important, is that the conference carriers in
many areas compete with themselves. And we find cases where we
see a conference carrier on a port -to-port basis is a member of
the conference and it is independent on an intermodal basis.
So they are, in fact, independent on a point-to-port basis,
conference on a port-to-port basis and we sometimes find that
the total intermodal rate is lower on the intermodal basis
which is a more costly and more expensive transportation chain
than a port-to-port.
Iha 5h1fa_arla Earakacilial_ D pniarana
Naftl&PRIgLfaQV
lavisLamilAm,
Chairman of the Board
Ted L. Rausch and Company
The merits of conference versus non-conference steamship
service Is a very controversial subject and the international
freight forwarder can serve as the Devil's advocate.
Forwarders need both conference and non-conference
carriers to keep ocean freight rates in balance. We do a great
deal of rate negotiations for our clients and believe that the
competition offered by all carriers is to the benefit of the
shipping public.
The September 12 issue of the Mew YgEk jpMEAAI Di
"The
Pacific
Westbound Conference, which has
lost a third of its members
since last year, will face critical issues at its owners
meeting this month as many members question the effectiveness
and even the survival of the group.
Lsamvrcg article by Maureen Robb stated: "American President Lines, for instance, said it is
concerned that the present structure of the leading Pacific
conference has become 'obsolete' and it is evaluating several
major alternatives to the system.
"The conference, which is down to 11 members from 16 In
January 1982, has seen its market share fall from about 75
percent then to an estimated 50 percent now."
Why are the conferences in trouble?
Many conference rules are too restrictive to individual
carriers who need the right to make spot decisions on rates for
certain types of shipments.
The voting system at the conference table allows
carriers who are member carriers but not serving certain trade
routes within the conference scope to dictate rates to areas
they do not even serve.
Conference carrier groups are not responsive to shipper
needs and thereby not only prevent the shipper from getting
business, but also lose business themselves.
One good example of this was the request that the
Pacific Coast European Conference recently received from
shippers asking for reduced rates on frozen potatoes from the
-47-
Pacific West Coast to the Continent. Due to crop failures in
Europe there is a shortage of potatoes and in order to be
competitive with Eastern Canadian exporters, the West Coast
rate needed to be reduced. The Conference decided against the
shipper request, which will most likely result in loss of U.S.
exports, plus the reefer space on the ships calling here will
not be used to capacity.
We are presently experiencing faster rate action from
the non-conference carriers, but their big problem is that they
do not have an adequate inventory of specialized container
equipment such as refrigerated containers, flat racks and bulk
liquid containers.
Not all conferences are unresponsive to shipper needs,
but they certainly need to be more progressive in their
thinking.
The practice by
individual
carriers of Jumping in and
out of the conference at will is something which must be dealt
with. It is unfair to the shipping public and must be stopped
to give shippers a better chance at international markets
through equitable freight rates.
CONFERENCE SPEAKERS
Margery P. Abbott
Port of Portland
PO Box 3529
Portland, OR 97208
Michael Martin
Dept of Ag and Resource Economics
Oregon State University
Corvallis, OR 97331
Victor Atiyeh
Governor of Oregon
State Capitol Building
Salem, OR 97310
David Neset
Port of Portland
PO Box 3529
Portland, OR 97208
James A. Beall
Garvey Schubert Adams Barer
1800 ONE Main Place, 18th Floor
Portland, OR 97204
Steven Newman
Col. R. Customs, Brokers &
Forwarders Assoc.
421 SW 6th, Suite 920
Portland, OR 97204
David Buffam
Ted L. Rausch Co. of Oregon
1628 NW Everett, PO Box 3525
Portland, OR 97208
Dick Copeland
National Assoc of Marine Exchanges
200 SW Market St., Suite 220
Portland, OR 97201
Roland Cornelius
Int'l Shipping Co., Inc.
421 SW 6th
Portland, OR 97204
Erik Falkenberg
Westwood Shipping
PO Box 1645
Tacoma, WA 98401
Scott Fitzwater
Dillingham Ship Repair
PO Box 4367
Portland, OR 97208
Samuel Guess
Senator, Washington State
W. 408 33rd Ave.
Spokane, WA 99203
Capt. John Pullen
Maritime Admin Office
1220 SW 3rd Ave., Rm. 321
Portland, OR 97204
W.L. Slack
Business Rep Local 48 113 EW
2032 Lloyd Center
Portland, OR 97232
George Tuckey
NW Marine Iron Works
PO Box 3109
Portland, OR 97208
Michael Uremovich
American President Lines
1950 Franklin St.
Oakland, CA 94612
LUNCHEON ATTENDEES
Oscar Brandt
Nautical. Society of Oregon
12200 SW Lesser Rd.
Portland, OR 97219
Stan Morgan
American President Lines
421 SW 6th, Suite 410
Portland, OR 97204
Ruth Brandt
Nautical Society of Oregon
12200 SW Lesser Rd.
Portland, OR 97219
Doug Parks
Gene Sause & Co.
200 SW Market St.
Portland, OR 97201
Bill Boldt
OSU Extension Service
PO Box 1261
Portland, OR 97207
R.E. Rabe
Matson Terminals, Inc.
12001 N. Portland Rd.
Portland, OR 97203
Roland Fisher
Waterway Terminals
PO Box 3349
Portland, OR 97208
Charles Thomas
Coast Line Transportation
Rt 1, Box 442E
Portland, OR 9723]
Walter Gadsby, Jr.
States Line (Ret)
4300 SW Fairview Blvd.
Portland, OR 97221
Thomas J. White
Parks Montague Allen & Greif
1200 Jackson Tower
Portland, OR 97208
Nancy Hanks
American President Lines
421 SW 6th, Suite 410
Portland, OR 97204
Elaine Lycan
Port of Portland
PO Box 3529
Portland, OR 97208
Jerry McAllister
Jones Oregon Stevedore Co.
PO Box 10167
Portland, OR 97210
James McDonald
Waterway Terminals Co.
PO Box 3349
Portland, OR 97208
-5Q-
CONFERENCE ATTENDEES
Eric Anderson
Art Anderson Associates
148 First St. Bremerton, WA 98310
W.G. Carter
OSU Extension/Sea Grant
PO Box 1261
Portland, OR 97207
Robert Beegle
Marcon Int'l. Inc.
PO Box 2350
Lynnwood, WA 98036
Ken Casavant
Washington State University
Department of Ag Economics
Pullman, WA 99164
Emil Berg
Hallmark, Griffith, Keating
800 Benj. Franklin Plaza
Portland, OR 97258
David Cheramy
11643 SE Flavel
Portland, OR 97266
C. Pete Blaskowsky
Western Transportation Co.
PO Box 3869
Portland, OR 97208
Admiral Clements
Riedel International, Inc.
PO Box 3320
Portland, OR 97208
William Bloom
Western Transportation Co.
PO Box 3869
Portland, OR 97208
John Cowden
Wood Tatum Mosser Brooke & Holden
Suite 1300, 1001 SW Fifth
Portland, OR 97204
David Bonnett
Tracor Applied Sciences
PO Box 1325
Silverdale, WA 98383
Keith Culver
Columbia Marine Lines, Inc.
6208 N. Ensign
Portland, OR 97225
Hal Bullock
Giannotti & Associates, Inc.
4915 NE Tolo Road
Bainbridge Island, WA 98110
Archie T. Davis
Jones Oregon Stevedore Company
2323 NW Suffolk
Portland, OR 97210
Nicholas Calley
PO Box 3109
Portland, OR 97208
CDR Steve Davis
U.S. Coast Guard
6767 N. Basin Ave.
Portland, OR 97217
Floyd Carpenter
Port of Longview
132 Valley View Dr.
Kelso, WA 98626
Tom Dowd
Washington Sea Grant Program
Mail Stop HF-05
Seattle, WA 98195
NW Marine Iron Works
-51-
Gary Es gate
Department of Commerce
428 Labor & Industries Bldg.
Salem, OR 97310
Fred Heard
Department of Commerce
428 Labor & Industries Bldg.
Salem, OR 97310
Steve Felkins
Port of Astoria
Portway
Astoria, OR 97103
Jim Henderson
Tracor Applied Sciences
PO Box 1325
Silverdale, OR 98383
Tom Gentle
OSU Extension Communications
Oregon State University
Corvallis, OR 97331
Karen Hilton
General Steamship Corp.
421 SW 6th Ave.
Portland, OR 97204
Greg Gibbs
Kerr Steamship Co., Inc.
1 SW Columbia Suite 450
Portland, OR 97258-2022
Maurice Holcombe
Toplis & Harding Inc.
319 SW Washington
Portland, OR 97204
Ernest Gibson
Progress Electronics Co. of Oregon, Inc.
5160 N. Lagoon Ave.
Portland, OR 97217
Margaret W. (Peg) Johnson
Ogden Beeman & Associates
319 SW Washington
Portland, OR 97204
Capt. Kirk Greiner
U.S. Coast Guard
6767 N. Basin
Portland, OR 97217
Walter. A. Larsen
W.A. Larsen. Co., Inc.
5120 SW Dover Lane
Portland, OR 97225
Jim Grider
NW Marine Iron Works
Swan Island
Portland, OR 97217
Deborah Lipton
Oregon State Board of Maritime Pilots
1400 SW 5th, Rm 201
Portland, OR 97201
Ray S. Hansen CH2M Hill
1500 114 Ave., SE Bellevue, WA 98004
Barbara Low
Port of Portland
PO Box 3529
Portland, OR 97208
Douglas A. Hardesty
Columbia Industrial Park
2000 E. Columbia Way
Vancouver, WA 98661
G.W. Marsh
Reichhold Chemicals, Inc.
PO Box 810
St. Helens, OR 97051
-52-
James E. McGraw
General Steamship Corp.
421 SW 6th Ave.
Portland, OR 97204
Capt. Peter Norwood
Port of Portland
PO Box 3529
Portland, OR 97208
Charles H. McKeown
Port of Portland
PO Box 3529
Portland, OR 97208
John E. Patrizio
Cranston Machinery Co., Inc.
PO Box 68207
Oak Grove, OR 97268
Dawn Pavitt-Ryan
Port of Portland
PO Box 3529
Portland, OR 97208
Bob McNannay
Port of Longview
PO Box 1258
Longview, WA 98632
John Pedisich, Jr.
Waterway Terminals C .
PO Box 3349
Portland, OR 97208
Hilarie Miller
Crowley Maritime
70 Box 17178
Portland, OR 97217
C.R. Minus
Matson
1618 SW 1st Ave.
Portland, OR 97201
Lenny Pendexter
American Bureau of Shipping
1618 1st Ave., Rm 220
Portland, OR 97201-5765
Betty Morrison
OSU Extension Service
PO Box 1261
Portland, OR 97207
John M. Pisani
US Dept of Trans Maritime Admin
400 7th St., SW
Washington D.C. 20590
Capt. Robert Mundell
National Cargo Bureau, Inc.
4744 N. Interstate Ave.
Portland, OR 97217
Geary Powell
McCall Oil & Chemical
808 SW 15th St.
Portland, OR 97210
Ted Nethery
Halton Tractor Co. PO Box 3377
Portland, OR 97208
Lt. Michael Rand
US Coast Guard
6767 N. Basin
Portland, OR 97217
Ralph G. Nolte
Port of Longview PO Box 1258
Longview, WA 98632
Don Ray
Willamette Tug & Barge
PO Box 3320
Portland, OR 97208
-53-
C. Kent Roberts Parks Montague Allen & Greif
1200 Jackson Tower
Portland, OR 97205
F.D. "Bob" Thoman
NW Marine Iron Works
2516 NW 29th Ave.
Portland, OR 97210
Dan Rogers
American Hoist & Derrick Co. 1103 SW Kendall
Troutdale, OR 97060
Robert Umphress
ITT Mackay
2701 N. Hayden Is. Dr.
Portland, OR 97217
Theron V. Rust
Port of Pasco
PO Box 769
Pasco, WA 99301
Russell J. Urry
Cascade Shipping Co.
500 Jackson Tower
Portland, OR 97205
Tony Schlesinger
Sanko Kisen USA Corp.
550 Jackson Tower Portland, OR 97205
Glenn Vanselow
Port of Portland
PO Box 3529
Portland, OR 97208
Jerry L. Severson Albany Insurance Co.
3931 SW Kelly Ave. Portland, OR 97201
Ray Verzosa
McCall Oil & Chamical
808 SW 15th St.
Portland, OR 97210
Fred Smith
OSU Ag. Economics Oregon State University Corvallis, OR 97331
R.N. Vickery
Kerr Steamship Co., Inc.
1 SW Columbia. Suite 450
Portland, OR 97258-2022
John Spencer
Riedel International
PO Box 3320
Portland, OR 97208
Frank Vizzini
Bauer Winfree Anderson Fountain &
Schaub, PC
421 SW 6th Ave.
Portland, OR 97204
Mike Spranger WSU Sea Grant 1918 NE 78th St. Vancouver, WA 98665
Bill Wick
OSU Sea Grant Program
Oregon State University
Corvallis, OR 97331
Chief James Thacker
Multnomah Co. Sheriff's Office 12240 NE Glisan St. Portland, OR 97230
Ben Williams
Esquire's Professional Cleaning
635 SE 70th
Portland, OR 97215
-54-
Dan Winslow
Corps of Engineers
316 SW Pine St.
Portland, OR 97204
Ruth Wood
Maritime Affairs
83938 Cloud Nine Rd.
Florence, OR 97439
William H. Zavin II
NW Marine Iron Works
2516 NW 29th Ave.
Portland, OR 97210
DATE DUE
William Slack
The Oregon State University Extension Service provides education and information
based on timely research to help Oregonians solve problems and develop skills
related to youth, family, community, farm, forest, energy, and marine resources.
Extension's Marine Advisory program provides education, training, and technical
assistance to people with ocean-related needs and interest. Major efforts are
concentrated in the areas of fisheries and wildlife, marine engineering, food science
and technology, economics, business, resource management, education, and recreation.
Extension Service, Oregon State University, Corvallis, 0. E. Smith, director. This
publication was produced and distributed in furtherance of the Acts of Congress of
May 8 and June 30, 1914. Extension work is a cooperative program of Oregon State
University, the U.S. Department of Agriculture, and Oregon counties.
Extension's Marine Advisory Program is supported in part by the Sea Grant Program,
National Oceanic and Atmospheric Administration, U.S. Department of Commerce.
Oregon State University Extension Service offers educational programs, activities,
and materials without regard to race, color, national origin, or sex as required by Title
VI of the Civil Rights Act of 1964 and Title IX of the Education Amendments of 1972.
Oregon State University Extension Service is an Equal Opportunity Employer.